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.
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