R-Life to raise Rs 2,000 cr via IPO

Reliance Life Insurance, an Anil Dhirubhai Ambani Group (ADAG) company, has decided to enter the capital market to mop up Rs 1,500-2,000 crore through an initial public offer (IPO). This will be the first instance of listing by a life insurance company on any Indian bourse.

According to sources, the company is planning to issue fresh shares amounting to 15-20 per cent of its expanded equity, which would value the company between Rs 12,000 crore and Rs 15,000 crore.

Some leading investment bankers such as Deutsche Bank and Enam Financial had already been informally appointed, sources said, adding that some more bankers would be roped in soon.

Reliance Capital Chief Executive Officer Sam Ghosh said, “We are evaluating various options, including listing on stock exchanges or even a strategic sale of a minority stake.”

According to sources, the company planned to file the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi) by the end of this month or early next month.

However, much depends on the clarification for disclosures and other issues from the Insurance Regulatory and Development Authority (Irda). “Since this is the first IPO by an insurance company, the regulator needs to clarify certain issues, particularly on disclosure norms. The company is in the process of getting some clarification from Irda,” sources said.

Last year, ICICI Bank made an attempt to list its insurance business by creating a holding company structure. However, the Reserve Bank of India (RBI) gave it a thumbs down.

Under the current norms, it would be difficult for other Indian insurance players to list on exchanges as in most of the cases, the limit of 26 per cent foreign investment has been exhausted. Barring Reliance Life Insurance, Sahara Life Insurance and Life Insurance Corporation of India, foreign strategic investors have 26 per cent stake in almost all insurance companies in the country.

As a result, foreign institutional investors would not be allowed to participate if these companies went public, said a leading banker.

However, once the pending Insurance Bill is passed and the limit for foreign investment is increased to 49 per cent from the current level of 26 per cent, many joint ventures would explore the possibility of entering the capital market.

Reliance Life Insurance is a wholly-owned subsidiary of Reliance Capital. With 10.3 per cent market share among the private insurance players, Reliance Life is ranked fourth in terms of total premium and third in terms of weighted premium. The top three private players in terms of total premium are ICICI Pru Life, SBI Life and Bajaj Allianz.