HDFC Life Insurance Company Ltd IPO..............Should you apply????

Hello Friends,

Another IPO, another insurance company. I guess India is offloading all its insurance company shares in the market. Today’s IPO to be discussed is HDFC Life Insurance Company Ltd. The company is promoted by Housing Development Finance Corporation Limited, Standard Life (Mauritius Holdings) 2006 Limited And Standard Life Aberdeen Plc.



Lets first look at the basics.

Particulars
Details
Company Name
HDFC Life Insurance Company Ltd
Issue Open Date
07th Nov 2017
Issue Closing Date
09th Nov 2017
Issue Price Band
Rs 275 to Rs 290
Issue Size
Rs 8695.01 Crs
Shares per Lot
50 Shares



About the company!!!

The company is in the business of life insurance. But along with life insurance it also provides Health insurance, Investment plans, retirement plans etc. It’s a part of HDFC. HDFC Life is one of the most profitable life insurers, based on Value of New Business (VNB) margin, among the top five private life insurers in India (measured on total new business premium) in Fiscal 2016 and Fiscal 2017, according to CRISIL.

Now that you know the company, should you invest in HDFC Life Insurance Company Ltd?

Come let’s dive into this company to look at the fruits it might hold.

Utilization of Funds!!!

The issue is a pure OFS and therefore no funds will come into the company.




So into the Financials now!!!!

1.       The company’s networth has increased from Rs 2180.78 Crs as on 31.03.2013 to Rs Rs 4476.09 Crs as on 30.09.2017, which is pretty good.

2.       The company has a good amount of money invested in fixed assets mainly intangible assets. The company is having Rs 343.61 Crs in Fixed Assets as on 30.09.2017.

3.       The company’s investment value, which is the most important figure for an asset management company is Rs 99534.03 Crs as on 30.09.2017 which shows the company’s strength.

4.       The company’s profit has increased from Rs 447.73 Crs in FY 2012-13 to Rs 892.13 Crs in FY 2016-17 and also made a profit of Rs 554.85 Crs in H1 of FY 2017-18. Profits are growing steadily.

Valuations!!!

Now lets come to the most important part. The valuations: The company’s growth on the EPS level has not been that great. Its basic EPS has only increased from Rs 3.9 in 2014-15 to Rs 4.5 in 2016-17. The diluted is not much different. So with a EPS of Rs 4.5 the PE at Rs 290 comes around 65, which is very expensive. If you look at the recent IPO of Reliance Nippon, the PE of that issue was only 36.68. However SBI Life was priced at a whooping PE of 73. Comparing to that HDFC Life seems reasonable. However its important to note that SBI Life is trading at 630 which is 10% below its IPO cutoff price. Further, if you look at the recent IPOs, the signals quite seem like the IPO fever is wearing off. At this point I am not sure that HDFC Life would be able to pull off a huge listing.
So the verdict on this case!!!

HDFC Life Insurance Company Ltd looks “avoid for now”. Being from the house of HDFC, it surely has potential. Wait for the right time and enter.

Thank you very much for joining us.


-RicherInvestor




Written by Roger Vins Herman (CA, Mcom)


Disclosures:

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

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