The shares of a number of insurance companies are increasingly changing hands in off-market transactions. A mix of recent deal action and hopes of listing are driving the volumes, according to dealers in unlisted securities.
Gray market estimates suggests that there are at least 1.5 to 3 million shares which have been granted under the ESOP route for each of the companies. Around ten% of this is estimated to be floating stock-which are in public hands and see transactions.
Enquiries for transactions have been heard of by dealers from Kolkata to Rajkot and Chennai, according to those who deal in such unlisted securities.
Sandip Ginodia, proprietor of Abhishek Securities, a Kolkata-based dealer in unlisted shares said that shares are freely available in only a handful of the insurance companies operating in the company.
"All three have employees selling shares they have got them through the ESOP (Employee Stock Option Scheme) route. Share transactions are generally in the range of 2,000-5,000 shares per lot, with high networth individuals emerging as the major buyers," he said.
Estimates from two different dealers put the price per share for ICICI Lombard General Insurance at Rs 125-185 and ICICI Prudential Life Insurance at Rs 205-265. The price for shares of HDFC Standard Life Insurance Company was Rs 135-175. This puts the total value of the shares with employees of the three companies at around Rs.100 crore.
The scarcity of insurance players' shares and perceived relative opportunity for the sector has resulted in increased volumes of share transactions in off-market deals. The shares are sold by employees converting ESOPs. High Networth Individuals who are willing to wait 5-10 years for a listing are the main players snapping up shares, according to intermediaries.
Vipul Gandhi, owner of Rajkot-based Gandhi Associates which deals in unlisted shares pointed out that a number of insurance companies had seen big ticket stake sales in recent times including HDFC Standard Life Insurance and Royal Sundaram Alliance Insurance.
The Housing Development Finance Corporation (HDFC) in December had also recently announced that the Azim Premji Trust would buy 0.95% stake in HDFC Standard Life for Rs 198.9 crore.
Sundaram Finance announced in February its decision to purchase UK-based RSA Group's 26% stake in its insurance company Royal Sundaram Alliance Insurance for Rs 450 crore. Besides, the United Kingdom's Bupa group has announced its intention to increase stake from 26% to 49% in Max Bupa Health Insurance.
With so much activity, investors are betting on the fact that there will be some movement towards an initial public offer in the insurance space, said Gandhi from Rajkot.
"Individuals and some institutions are also involved in trades. There are hopes that they would look at listing," he said.
Regulations allow for a listing subject to a profitability and track-record considerations. For now transactions are limited to the northern part of the country though there have been enquiries in the south as well.
"Transactions have been limited. It has not happened so much here, but prospects for the companies may be good in the long-term," said Dilip Surana, proprietor, Strides Financial Services who is Chennai-based.
HDFC Standard Life declined comment. Emails sent to the other two insurance players did not receive a reply.