GENERAL INSURANCE CORPORATION OF INDIA LIMITED IPO

COMPANY OVERVIEW

General Insurance Corporation of India is the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017, and it accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during Fiscal 2017, according to CRISIL Research. GIC is also an international reinsurer that underwrote business from 161 countries as at June 30, 2017. According to CRISIL Research, the company ranked as the 12th largest global reinsurer in 2016 and the 3rd largest Asian reinsurer in 2015, in terms of gross premiums accepted. They provides various general insurance products like property, energy, marine, engineering, miscellaneous, aviation-hull/spares-rotor wing, aviation-hull/spares-fixed wing, liability, aviation treaty–hull, spares and liability insurance products. They also offers cargo and offshore energy, motor, life, agriculture, space, health, credit and financial insurance.

 Through their more than 44 years of experience in, and commitment to, providing reinsurance products and services, they believe that they have become a trusted brand to their insurance and reinsurance customers in India and overseas.

ISSUE DETAILS 

• Issue Open    :   11th October, 2017
• Issue Closes  :   13th October, 2017
• Issue Type     :   Book Built Issue IPO
• Face Value     :   Rs 5/ Equity Shares
• Issue Price     :   Rs.855– Rs.912/ Equity Share
• Issue Size       :  124,700,000 Equity Shares
• Valuation       :   Rs 11,300 Cr.(Approx.)
• Market Lot    :    16 Shares 
• Minimum Order Quantity: 16 Shares and in multiples
• Listing At       :    BSE, NSE

#A discount of ₹ 45) on the Offer Price is being offered to Retail Individual Bidders (“Retail Discount”) and to Eligible Employees (defined below) Bidding in the Employee Reservation Portion (if any) (“Employee Discount”).

TENTATIVE DATES

• Basis of Allotment(Finalisation)  :   18th October, 2017
• Refund Initiation                                 :   23rd October, 2017
• Crediting of Shares                            :   24th October, 2017
• Commencement of Trading           :   25th October, 2017

ISSUE OBJECTS

• Augmenting the capital base of the Corporation to support the growth of their business and to maintain current solvency levels; and

• General corporate purposes.

COMPANY PROMOTERS 

President of India, acting through Ministry of Finance.

TOP 10 SHAREHOLDERS 

COMPETITIVE STRENGTHS OF COMPANY 

• Leader in Indian reinsurance industry with a trusted brand and 44 years of experience

• Significant global player with growing international presence

• Diversified product portfolio and revenue streams

• Robust and comprehensive risk management framework

• Diversified investment portfolio generating strong growth and attractive yields

• Strong financial track record and a strong balance sheet

• Experienced management team

INDUSTRY OVERVIEW

The Indian economy is the fourth largest economy in the world in terms of GDP at purchasing power parity (PPP) exchange rates, with an estimated GDP, in PPP terms, for 2016 of U.S.$8.7 trillion. (Source: CIA World Factbook).

According to CRISIL Research, India’s GDP at current prices in Fiscal 2017 was ₹152 trillion.

India has the world’s second largest population, estimated at 1,210 million (Source: Censusinfo India 2011) and the second largest labour force, estimated at 513.7 million people. (Source: CIA World Factbook) It also has one of the youngest populations in the world with a median age of 27.6 years, a high share of working population and rapid urbanization (2.38% change per annum). (Source: CIA World Factbook)

The Indian economy has shown moderate recovery in the past three fiscal years. Domestic GDP growth showed a marginal improvement from 7.2% in Fiscal 2015 to 7.9% in Fiscal 2016, primarily attributable to an increase in private final consumption expenditure from 6.2% in Fiscal 2015 to 7.4% in Fiscal 2016. (Source: RBI Annual Report 2015-16.) Real GDP growth, however, slowed to 7.1% in Fiscal 2017 with weak private investment and a slowdown due to the Government’s demonetization program. (Source: Central Statistical Office of India’s Ministry of Statistics and Programme Implementation)

The following graph shows global reinsurance non-life and life insurance premium growth over the past five years and projected growth for 2017 and 2018:

The following charts shows primary non-life insurance and life insurance premium growth over the past five years and projected growth for 2017 and 2018:

Global interest rate environment to remain subdued:

The following charts show the five year CAGR for life and non-life insurance business worldwide and in advanced and emerging markets, the growth of the Indian reinsurance market over the past ten fiscal years and estimated market size in Fiscal 2017 is shown in the following graph:

 

Indian Market Size Growth

Emerging Markets Growth:

VALUATIONS

As we can see in tabular presentation given below of P/E Ratio, what we have here is reasonably fair valuations. The company’s P/E stands @24.97x & 23.41x on consolidated as well as on standalone basis(Both @ cut-off price)

EARNINGS PER SHARE

• As per Consolidated Financial Statements 

• As per Standalone Financial Statements 

RoNW

COMPARISON WITH LISTED PEERS

The Company does not have any listed industry peers in India.

RESTATED CONSOLIDATED FINANCIAL POSITION SUMMARY

RESTATED CONSOLIDATED STATEMENT OF PROFIT & LOSS ACCOUNT

RESTATED STANDALONE FINANCIAL POSITION SUMMARY

RESTATED STANDALONE STATEMENT OF PROFIT & LOSS ACCOUNT

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

Fellas its a fancy USD 1.7 billion initial public offering attracting investors first time ever in the reinsurance sector. Its the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017.

It’s valuations have steadily gone up over the last 5 to 10 years, as the market has figured out how to value such a sector.

Let’s have a look on major things to consider before rushing to put money in the company:

• Valuations: Crucial part for any company which has shown here as the IPO sets a fairly priced valuation @ a P/E of 24.97x & 23.41x on consolidated as well as on standalone basis(Both @ cut-off price) and recent listing of SBI LIFE INSURANCE(though not a peers but insurance sector) had a P/E of 73x plus which makes GIC even more interesting ,

• RoNW/EPS: Fairly priced and consistent rise in EPS makes it fancy though RoNW has seen sharp fall in last three consecutive fiscal years.

• CAGR: Its gross premiums and profit after tax on a restated consolidated basis have grown at a CAGR of 48.65 percent and 4.23 percent during FY15-FY17.

• Earnings: Companies earnings have seemed to be promising as it have consistent growth in “Total Revenue” over the years which is necessary for any business to run exponentially over the years.

• Geographic Mix: Company developed its overseas business through home office in Mumbai, branch offices in London, Dubai and Kuala Lumpur, a representative office in Moscow, a subsidiary in South Africa and a subsidiary in the United Kingdom.

• GMP: Trending these days issue’s Grey market premium as on 08-10-2017 N/A with Kostak was at Rs.650-700

Fellas lot of things already mentioned above have shown positiveness towards the issue infact GMP makes us eager for the subscription. The company seems to have monopoly(As per no listed peers) one may consider for subscribing the issue for listing benefits as well as for even better returns one may go for 5 years plus time horizon.*