It is a down time for the Indian banks and they are seen struggling to raise capital. But talking about the insurance companies, they are celebrating and having a great time. The reason being the IPO or the initial public offering at the ICICI Lombard General Insurance Co., which is worth $900 million has become the country’s largest non-state-owned property and casualty underwriter, with a market share of 84%.
According to Bank of America Merrill Lynch which recently announced that the shares will sell for Rs. 651 to Rs. 661 or $10.21 to $10.35 apiece, are being proposed by the present owners which are ICICI Bank Ltd BSE -1.21 %, which is a Mumbai based organization, and by a unit of Canada’s Fairfax Financial Holdings Ltd., at a 48% premium to the last deal. Fairfax offloaded part of its stake to investors including Warburg Pincus, the stock market news says.
Right at the top, the ICICI Lombard General Insurance Co. would be worth around $330 million which is less than its loan loss provisions in one quarter. Though, with ICICI Lombard being traded publicly, since the lender remains to continue the 58% holding of the unit will help them towards supporting its price-to-book ratio of 1.9, a steep premium to the 0.8 average for state-controlled lenders.
Until now, the nation had not witnessed any publicly traded insurance company. It was ICICI Prudential Life Insurance Co. that stopped the famine a year back and its success where the shares are increased to 46% percent as of now this year has helped the others positively.
State Bank of India Life Insurance Co. also wishes to come up with their own IPO too after a day of the close of the ICICI Lombard IPO, according to the IPO news. Another one that wants to follow the league is the IPO of the HDFC Standard Life Insurance Co which is the second biggest life insurance company after the state run Life Insurance Corp. State Bank of India BSE 1.03 %, which is the controlling shareholder of SBI Life Insurance Co is eyeing at a loan portfolio too. It is quite obvious and expected for the nation’s biggest commercial lender to unlock the value wherever it can.
Now the question arises that with so many IPO’s around, are there enough investors for all this insurance paper? The ICICI Lombard General Insurance Co is costlier than People’s Insurance Co. (Group) of China. However, the former is lesser expensive than Australia’s Suncorp Group. We are aware that India is unfortunately under insured and hence offers a lot of scope of incredible growth. Due to the damage of $27 billion from the natural calamities like cyclone hudhud, eastern and northern India floods, J&K floods, cyclone Phailin, since the year 2014, the losses for the insurers came to only $2.5 billion.
ICICI Lombard has 8.4% percent of the Indian market and the state run companies continue to dominate.
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