HDFC Life to go for IPO in FY14

Firm looking at a margin of 15 per cent before public issue

HDFC Life plans to raise funds through an initial public offering (IPO) of 10 per cent of the capital base. The private-sector life insurer has already started the process internally, and is expected to hit the market in the next financial year. The company has posted a net profit of Rs 271 crore, for the first time since its inception.

Its total premiums collected grew 13 per cent during that financial year to Rs 10,202 crore. The company’s embedded value stood at Rs 4,800 crore as on March 31.

The company is looking at a margin of 15 per cent before going to public. Currently, HDFC Life has reported a margin of 10.25 per cent.

HDFC Life is a joint venture between Housing Development Finance Corporation (HDFC) Ltd and UK-based insurer, Standard Life. While HDFC holds a stake of 74 per cent, the British insurer holds the remaining 26 per cent — the maximum permitted under Indian laws.

While most private insurers plan to wait for a rise in the foreign direct investment (FDI) limit in insurance — from 26 per cent to 49 per cent — HDFC Life is prepared for a domestic issue, even if the FDI limit is not raised.

“Even if the FDI limit is not raised to 49 per cent, we will go ahead with a domestic issue. We have started the process internally,” said Amitabh Chaudhry, MD & CEO HDFC Life. He did not clarify whether it is only the promoter, HDFC, that would dilute the holdings or whether it would be pared in a parity basis.

“It is not yet decided whether Standard Life would like to dilute any stake as there is an agreement that their holding would go up to 49 per cent when the FDI limit is relaxed,” he said. “All these things will be decided when we are ready with the issue.”

“There are a lot of things to be considered while going for a public offering,” Chaudhry noted. “There is a need to access what should the business model and acceptable margins be in the future. Then, the valuation of the company has to be considered. The combination of all these would decide the timing and the size of the issue.”