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.