Can HDFC succeed where ICICI failed? Plans life insurance IPO by September 2015


hdfc life logoHDFC Standard Life Insurance is expected to tap the primary market with an initial public offering (IPO) in the first half of the current fiscal year ending 31 March 2016. In a recent interview with the Hindu Business Line, HDFC Limited chief Keki Mistry said the life insurance venture is targeting to raise INR2,400 crore by diluting 10 per cent stake.

“Standard Life has the ability to increase its stake. We are in discussions to determine exactly how much it will go up to. Once that transaction is completed, we will file for an IPO,” said the top executive. The UK-based Standard Life has 26 per cent stake in the life insurance joint venture while HDFC has nearly 72 per cent with the rest being held by other institutions. Soon after the Insurance Bill was passed by the Parliament in March 2015, several insurance players said their foreign partners are interested in raising equity stake to 49%.

“My sense is that it will happen in the first half of FY16. All key stakeholders, including Standard Life, HDFC and the HDFC Standard Life, want to go for an IPO,” he added. Some earlier reports indicated that Bank of America Merrill Lynch, JP Morgan, Morgan Stanley, Credit Suisse and JM Financial have been appointed to manage the IPO.

If the plans go as expected, HDFC Standard Life Insurance will be among the first new-age life insurance companies to get listed on stock exchanges. While it appears to be a smooth sailing for HDFC Standard Life, others have faced issues with plans to raise more capital. Last month, ICICI Bank and UK-based Prudential Plc shelved their plans to sell 5% stake in ICICI Prudential joint venture after getting poor response from global investors. The stake sale was widely seen as an attempt to discover a valuation for an eventual IPO. Investors reportedly balked at the rich valuations, believed to be in the range of INR34,000 crore – INR37,000 crore.

HDFC Standard Life’s success could pave the way for other insurance companies to raise funds from primary market. Given the soaring markets, risk appetite is evidently quite high in India and the fact that there are not many pure play insurance businesses listed on the bourses would only help such IPOs.

Meanwhile, HDFC is in no hurry to list its non-life insurance subsidiary HDFC Ergo General Insurance. HDFC Ergo is a 74:26 joint venture between HDFC and Ergo International AG – the primary insurance entity of Munich Re Group. The executive, however, added that Ergo International would probably want to increase its stake to the upper limit of 49%.


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