SBI LIFE INSURANCE COMPANY LTD. IPO

WHETHER INVESTORS SHOULD GO FOR THIS? 

SBI Life Insurance Company Limited a joint venture between the State Bank and BNPPC a name not new among investors, the name itself shorts out so many answers.  India’s largest private life insurer, in terms of New Business Premium generated in each fiscal year since 2010 and has shown consistent growth in CAGR over the years having its latest premium generated from new business at a CAGR of 35.45% which is the highest among the top five private life insurers (in terms of total premium in Fiscal 2017) in India.

As of July 31, 2017, SBI Life had a comprehensive product portfolio of 37 individual and group products (of which eight products are group products), including a range of protection and savings products to address the insurance needs of diverse customer segments. It has strong solvency ratio of 2.11 x as on 30.06.17 as against regulatory minimum of 1.50 x.Its 11.6% expense ratio is lowest amongst the peers.

Besides this the government effort to keep every citizen insured so that in case of the death of the individual the family gets the secured future will derive the future the company as SBI Life Insurance is an obvious choice for this.

ISSUE DETAILS 

• Issue Open    :   20th September, 2017
• Issue Closes  :   22nd September, 2017
• Issue Type     :   Book Built Issue IPO
• Issue Size       :  12,00,00,000 Equity Shares 
• Face Value     :   Rs 10/ Equity Shares
• Issue Price     :   Rs.685 – Rs.700/ Equity Share
• Valuation       :   8,400 Cr.(Approx.)
• Market Lot    :    21 Shares 
• Minimum Order Quantity: 21 Shares and in multiples
• Listing At       :    BSE, NSE

COMPANY OVERVIEW

The company was incorporated in the year 2000, SBI Life Insurance Company Limited is India based private life insurer. SBI Life Insurance is a joint venture between the State Bank and BNPPC. State Bank is India’s largest commercial bank. BNPPC, an insurance subsidiary of BNP Paribas, with operations across 36 jurisdictions internationally, is among the leading credit life insurance businesses globally. BNP Paribas is in top 10 global financial institution in terms of revenue.

The company has product a portfolio of 37 individual and group products, including a range of protection and savings products to address the insurance needs of diverse customer segments.

Company has developed a multi-channel distribution network comprising bank branches of SBI and its associated banks, individual agent network (93,849 agents) and other distribution channels including direct sales and sales through corporate agents, brokers, insurance marketing firms and other intermediaries.

The company turned profitable within the first five years of our operations, and have declared dividends every year since 2012.

ISSUE OBJECTS

Well unlike others this company has its basic objectives only:

• Carry out the disinvestment of 12,00,00,000 Equity Shares by the Selling Shareholders ; and

• To achieve the benefits of listing the Equity Shares on the Stock Exchanges.

COMPANY PROMOTERS

Promoters of the Company are State Bank and BNPPC.

BUSINESS STRATEGIES 

• Capitalise on insurance industry growth opportunities.

• Ensure profitable growth through balanced product portfolio and expansive distribution network.

• Enhance brand equity and continue to focus on customer satisfaction.

• Leverage technology to improve operating efficiency and support growth.

VALUATIONS

As far as Valuations are concerned the IPO is highly overvalued  with a P/E of 73.29x  at the upper price band and 71.72x on lower price band. (Both Diluted as well as on Basic EPS basis).

#Alternatively if we see P/E on taking average EPS then we find it @78.21x & 76.53x respectively (Both @ Upper & Lower Price Band)

NAV PER EQUITY SHARE

• Net asset value per Equity Share as on June 30, 2017 is ₹ 58.79.

• Net asset value per Equity Share as on March 31, 2017 is ₹ 55.52.

• Net asset value per Equity Share as on March 31, 2016 is ₹ 47.33.

• Net asset value per Equity Share as on March 31, 2015 is ₹ 40.56.

As the Offer consists only of an offer for sale by the Promoter Selling Shareholders, there will be no change in the NAV post-Offer.

EARNINGS PER SHARE

RoNW

PEER COMPARISON 

SUMMARY STATEMENT OF ASSETS & LIABILITIES

SUMMARY STATEMENT OF PROFIT  AND LOSS

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

As we have already discussed so many plus points though this does not concludes the rational decision regarding the investment in the IPO. Though we have seen lot of positive points such as;

• Company is a JV of SBI & BNPPC,

• SBI Life has product a portfolio of 37 individual and group products,

• Vast multi-channel distribution with pan-India presence,

• Company has not required additional capital infusion since 2008,

• New Business Premium generated increased at a CAGR of 35.45%,

But besides these we found Valuations to be our psychological barrier. Even if we compare with its already listed peer ICICI PRUDENTIAL INSURANCE we find that more interesting than investing in SBI LIFE. 

One can see below mentioned points which makes ICICI PRUDENTIAL INSURANCE more interesting than SBI LIFE INSURANCE:

• EPS of its peer ICICI PRU.@11.72 compared to SBI LIFE @9.55
• RoNW of ICICI PRU. @28.67% compared to SBI LIFE @19.35%
• NAV of ICICI PRU. 44.69 compared to SBI LIFE @55.52

We suggest to avoid the subscription in the IPO rather ICICI PRUDENTIAL its already listed peer seems more attractive than to invest in this*.

 

*Disclaimer: Author may or may not have interest in the issue before getting to conclusion consult your Financial Adviser. The Author shall not be responsible for any kind of loss of gain arising out of any investments.