SBI Life Insurance Company Ltd IPO............. Should you Invest???
Hello
friends,
We just
finished with 3 IPOs last week and another one lined up for this week is SBI
Life Insurance Company Ltd. Well it’s another insurance company. So now we have
some competition in the arena.
Particulars
|
Details
|
Issue Open Date
|
20th Sep
2017
|
Issue Closing Date
|
22nd Sep
2017
|
Issue Price Band
|
Rs 685 to Rs 700
|
Issue Size
|
12 Crs Shares *700 =
Rs 8400 Crs
|
Shares per Lot
|
21 Shares
|
Now that’s
done. Let’s look at the interiors.
About the
Company!!!
We all know
SBI Life Insurance Company Ltd. Well even if you don’t then I am sure you would
know SBI (State Bank of India) the banker to every Indian. Right? So they have
a joint venture with another bank BNP Paribas which is SBI Life Insurance
Company Ltd. The company is one of the leading life insurance companies in
India. In Fiscal 2017 SBI Life Insurance Company Ltd enjoyed a market
share of Individual Rated Premium of 20.69% among private life insurers in
India and 11.16% of the entire life insurance industry in India.
Promoters!!!
As mentioned earlier the company is a joint venture between
SBI and BNP Paribas.
Utilization of Funds!!!
The issue is an offer for sale, which means all the money
goes to the promoters. Although SBI is selling 2/3 of the issue and BNP Paribas
is selling 1/3 of the issue. Not sure on the reason of the inequality.
No matter what the above signify, if the company is not
having solid financials to back it up, it’s of no use. So let’s look inside the
hood and understand what the financials of the company looks like.
Looking at the Balance Sheet we can find that:
1)
The company has shown good growth in networth
from Rs 2736.419 Crs as on 31.03.2013 to Rs 5552.08 Crs as on 31.03.2017.
2)
Since it’s an insurance company we have to
analyse it differently. Their total specified or linked liability stands at Rs
44573.03 Crs as on 31.03.2017 however these are covered by assets and therefore
no worries here.
3)
Investments being more important in insurance
companies stand at Rs 51257.25 Crs as on 31.03.2017.
4)
The company’s fixed asset as on 31.03.2017 was
Rs 538.47 Crs and it had a net current asset at Rs 2678.29 Crs.
5)
Now looking into the Profit and Loss A/c, we see
that the company’s total income has increased from Rs 898.12 Crs in FY 2012-13
to Rs 1064.37 Crs in FY 2016-17.
6)
Profit has also grown along with revenue from Rs
630.11 Crs in FY 2012-13 to Rs 954.65 Crs in FY 2016-17.
7)
The company has a very good Net Profit ratio.
Further ROE in FY 2016-17 has been 17.19%. Very good performance indeed.
Valuations!!!
The company’s EPS for FY 2016-17 was Rs 9.55. This means
that at Rs 700 per share, the PE turns out to be more than 73 times. This is very high even when compared to ICICI.
The company is demanding high valuations due to their goodwill. However even
after accounting for goodwill this looks to be a very expensive IPO.
So after
looking into the financials and the valuations we would say that SBI Life
Insurance Company Ltd is a company that you should own, but not at this price.
Wait for it to list and then enter when the price looks more favorable, which
means that it’s better for you to avoid this issue.
Thank you for joining us.
-Richer Investor.
Written by Roger Vins Herman (CA, MCom)
Disclosures:
The author or any person at RicherInvestor doesn't have any financial interest in the Company.
Comments
Post a comment