ICICI Prudential Life IPO has received positive recommendations from most brokerage houses. India’s largest IPO in six years is priced in the range of INR300-334 per share and will raise INR6,056.7 crore at upper end of the price band for parent ICICI Bank. Although UK’s Prudential also hold nearly 26% equity stake in India’s biggest private life insurer, it is not selling shares in the IPO. Azim Premji’s PremjiInvest and Singapore’s Temasek are also not participating in the offer. Here are the summary points and analyst recommendations from major brokerage houses.
Analysts at Hem Securities are advising investors to SUBSCRIBE to the offer. “Company is bringing the issue at p/e multiple of 27-30 on post issue Q1FY17 annualized eps of Rs 11.28. At upper band, co is trading at P/EV multiple of 3.4x which is lower than its peer. Hence, looking after strong fundamentals, established & well known brand & strong parentage, co is looking attractive destination to deploy the funds in. Hence, we recommend “Subscribe”on issue,” said the brokerage houses’s research note on ICICI Prudential Life IPO.
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Citing low insurance penetration in India, SPA Research has put a SUBSCRIBE rating on the IPO. “Indian life insurance sector offers strong growth opportunity considering that it is already the tenth largest life insurance market in the world despite underpenetrated insurance market with a life insurance penetration of 2.7% in 2015 compared to Thailand (3.7%), Japan (8.3%) and South Africa (12.0%) and global average of 3.5%,” said the broker’s IPO note. “There is further scope for improvement in RoEV due to shift to higher margin non-linked business and higher investment variance. We recommend investors to SUBSCRIBE to the issue for long term gains,” added the research note.
Mumbai-based Choice Broking is also positive on the prospects of ICICI Prudential Life IPO and has advised clients to SUBSCRIBE to the IPO. “At higher price band of Rs334, ICICI Prudential’s valued at Rs479,390 mn or P/EV multiple of 3.4(x) of FY16 EVPS, which is around 47% premium to last stake sale by ICICI bank when it sold 6% stake for around Rs19,500 mn valuing the the company at Rs325,000 mn. However, the valuation appears attractive if we compare the recent share swap agreement between HDFC Life and Max life which valued at P/EV multiple of 4.2(x) of FY16 EVPS. Thus, keeping in mind the above observations, we recommend a “Subscribe” rating for the public issue,” said the brokerage house.
Analysts at Ajcon Global note that the IPO’s pricing has left potential upside for further appreciation given the company’s strong position in the market. “The share swap agreement of the recent proposed merger of Max life with HDFC life has Price/Embedded value multiple of 4.2x for a market share of 7.6 percent as against ICICI Prudential Life Price/Embedded value multiple of 3.4x with market share of 11.3 percent in overall market. Considering the multiple for HDFC Life – Max Life merger, we believe there is a potential upside to the issue price of Rs.334 at the upper end of the price band,” noted the company’s note on ICICI Prudential Life IPO.