HDFC begins IPO process of insurance arm

To sell 10% in HDFC Life

Housing Development Finance Corporation (HDFC) on Tuesday informed the stock exchanges that it has in-principle agreed to sell up to 10 per cent of its stake in HDFC Standard Life through offer for sale.

HDFC Life’s board of directors approved taking steps to initiate the initial public offer (IPO) process.

This would be the first life insurance company in the country to be listed.

The insurer was waiting for a nod from Foreign Investment Promotion Board (FIPB), which had referred its foreign direct investment (FDI) hike proposal in HDFC Life to Cabinet Committee on Economic Affairs (CCEA).

“The board of directors of HDFC Life approved taking steps to initiate the process for an initial public offer (IPO) by way of offer for sale by the Corporation, up to 10 per cent of the paid-up and issued equity share capital of HDFC Life,” said HDFC in a stock exchange notification.

The IPO is subject to relevant regulatory approvals including that of Insurance Regulatory and Development Authority of India, Securities & Exchange Board of India among others.

On April 1, Housing Development Finance Corporation had informed the exchanges that it completed the sale of its nine per cent stake in HDFC Life to Standard Life. This deal was announced in August 2015.

The foreign partner is taking its stake up to 35 per cent from 26 per cent in HDFC Life. The value of the nine per cent stake is Rs 1,705 crore valuing the company at Rs 18,951.4 crore.

HDFC Life is a joint venture between HDFC and Standard Life Plc, a provider of financial services in the UK. Standard Life (Mauritius Holding) Ltd holds 26 per cent stake in the joint venture.

In 2000, HDFC and Standard Life launched a joint venture, HDFC Life, which was the  first  private  life insurance company to be granted a licence to operate in India.

Among the only insurers to clearly state that it was planning an IPO, HDFC Life was first waiting for a long duration for the FDI in insurance to be hiked to 49 per cent from 26 per cent. This was allowed when the Insurance Laws (Amendment) Bill was passed by the Parliament in February last year.

As per a company statement, HDFC Life posted net profit of Rs 818 crore for the year ended March 31, 2016, showing a growth of 4.2 per cent compared to previous financial year.

New business premium grew by 18.1 per cent to Rs 6,487 crore in FY16 compared to Rs 5,492 crore collected in the previous financial year.

HDFC Life’s total premiums collected grew by 10 per cent to Rs 16,313 crore in FY16 from Rs 14,830 crore in in FY15.

The insurer also recently completed incorporation of its wholly-owned subsidiary in the Dubai International Financial Centre (DIFC) called the ‘HDFC International Life and Re Company Limited’ (HILRCL).

HILRCL would initially offer reinsurance capacity to ceding insurers and may also foray into directly underwriting insurance contracts subject to receipt of necessary approvals.