New India Assurance Company Ltd IPO............. Should you apply????

Hello friends

A new month and fresh supply of IPOs are starting. Let’s get you the front row tickets to the premier as it’s gonna be amazing this month as well. The one we are going to talk about today is New India Assurance Company Ltd a Government of India Company.

Let’s get to the basics of it.

Particulars	Details
Issue Open Date	1st November 2017
Issue Closing Date	3rd November 2017
Issue Price Band	Rs 770 to Rs 800
Issue Size	Rs 9600 Crs
Shares per Lot	18 Shares
Face Book	Rs 5 /-

About the Company!!!

New India Assurance is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as of and for the fiscal year ended March 31, 2017 (Source: CRISIL Report). The Company has been in operation for almost a century. In Fiscal 2017, it had the largest market share of gross direct premium among general insurers in India (Source: CRISIL Report). As of March 31, 2017, it had issued 27.10 million policies across all our product segments, the highest among all general insurance companies in India (Source: CRISIL Report). As of June 30, 2017, their operations were spread across 29 States and seven Union Territories in India and across 28 other countries globally through a number of international branches, agency offices and Subsidiaries including a desk at Lloyd’s, London.

New India Assurance offers various insurance products such as fire insurance; marine insurance, motor insurance, crop insurance, health insurance and other insurance products.

The Industry!!!

The Indian economy with a gross domestic product (“GDP”) at current prices in the year fiscal year 2017 is estimated at Rs 151.84 trillion, showing a growth rate of 11.0% over the estimates of GDP for fiscal 2016 of Rs 136.82 trillion (Source: Central Statistical Office of India’s Ministry of Statistics and Programme Implementation, available at http://mospi.nic.in/sites/default/files/press_release/PRESS_NOTE_PE_2016-17.pdf as of May 31, 2017). It is one of the fastest growing major economies in the world with private final consumption contributing to over half of the overall GDP growth of 7.9% in 2015 – 2016 (Source: RBI Annual Report 2015 – 2016).

The global general insurance industry was sized at around USD 2.1 trillion in terms of premium (nominal terms) as of 2016. Asia is the third largest market for general insurance, accounting for 23% of gross direct premium whereas India has a share of only 0.83% in the world and 3.5% in Asia’s general insurance market as of 2016.

Global general insurance industry premiums (in nominal US dollar terms) grew at a steady 3.9% CAGR from 2010 to 2014. In 2015, premiums declined by 3.8% year-on-year, primarily reflecting the impact of widespread currency depreciation against the US dollar. However, the year 2016 observed an improvement in the premium growth and general insurance premium increased by 3.1%.

Utilization of Funds!!!

The issue is partly offer for sale and partly a fresh issue. The offer for sale is for Rs 7680 Crs and the fresh issue is for Rs 1920 Crs. The company has stated that its going to use the fresh issue towards meeting future capital requirements as the company grows and expands.

Financials!!!

Now let’s dive into the most important factor. The financials!

1.       The company’s total networth has grown from Rs 15862.44 Crs as on 31.03.2013 to Rs 25070.59 Crs as on 30.06.2017.

2.       The company is debt free.

3.       Investments being the core of insurance companies, the company’s investments have risen from Rs 31274.17 Crs as on 31.03.2013 to Rs 54559.73 Crs as on 30.06.2017.

4.       The company as a good amount of fixed assets in its side with Rs 364.14 Crs as on 30.06.2017.

5.       The company’s total revenue has increased from Rs 11220.29 Crs in FY 2012-13 to Rs 20471.39 Crs in FY 2016-17.

6.       The company is making an operating loss. However its income from investments are enough to give it a PAT of Rs 819.82 Crs in FY 2016-17.

Valuation!!!

The share is priced at Rs 770 to 800. The company’s EPS is at 10.25 basic as well as diluted for the year 2016-17. The PE comes to 78. Now ICICI Lombard came with its IPO at a pricing of 47.62 PE. Further ICICI Lombard was having good Operating profits. New India Assurance not only doesn’t have operating profits but it’s having huge operating losses. Therefore we can consider this company at par with investment companies. As in investment company I would say Tata Investments, Bajaj Holding & Investment are performing much better.

Therefore I would say you can avoid it for now. Can pick it up later on from market depending on its performance.

Thanks for joining us friends.

Keep learning!!!! Enjoy investing!!!!

-          RicherInvestor

-Written by Roger Vins (CA, MCom)

Disclosures:

The author or any person at RicherInvestor doesn't have any financial interest in the Company.