Insurance set of take off in India after Pru IPO is biggest in six years

Insurance in India is set to boom following the ten times over subscribed initial public offering of ICICI Prudential Life Insurance Company.

The issue was over subscribed by 10.48 times, making the first-ever initial public offering (IPO) by an Indian insurance company, India’s largest in six years.

The success of the IPO indicates the opportunity for insurers in a country of 1.3 billion people with growing incomes and financial awareness.

By 5:30pm Wednesday, the public issue had received bids for 1.38 billion shares against 132.37 million shares on offer, the Indian stock exchange data showed.

The institutional investor category was subscribed 11.83 times the 32.64 million shares on offer, while the non-institutional category comprising high net-worth individuals, for whom a little more than 24.48 million shares were set aside, was subscribed 28.55 times.

Retail investors, whose investments cannot exceed Rs2 lakh per individual, subscribed to 1.32 times the 57.12 million shares reserved for them, data showed.

The portion reserved for shareholders—existing ICICI Bank shareholders as on 7 September looking to bid for additional shares—was subscribed 12.2 times.

Anup Bagchi, managing director and chief executive, ICICI Securities Ltd, said that the success of ICICI Prucdential Life’s public issue bodes well for the insurance sector as well as the Indian capital markets.

‘Fantastic outcome’

Speaking to Indian markets website Live Mint, he said: “ICICI Prudential Life’s IPO had a fantastic outcome. It reiterates that size is not a constraint for good assets and investors—across categories—have appetite for quality issuances. We need more large-sized IPOs, and ICICI Prudential is a landmark deal in the current context of fundraising.

“More importantly, the banking and financial services space will get further diversified with many insurance companies looking to go public,” Bagchi said.

Anchor investors allotted shares of ICICI Prudential included Morgan Stanley Mauritius Company, Government of Singapore, UTI Trustee Co, SBI Trustee Co, Birla Sun Life Trustee Company among others.

The issue comes a little over a month after the merger between HDFC Standard Life Insurance and Max Life, which created India’s biggest insurance firm valued at an estimated US$10bn

Significant change

The IPO’s success and the HDFC-Max merger could indicate a significant change in the industry, with firms potentially scrambling to grab segments of the uninsured population.

“India needs insurance cover more than any other country,” according to Joydeep Roy, leader, insurance at PwC India, who was speaking to Indian news website Quartz India. “Hardly anybody has adequate life concert or health insurance in the country. Asset cover is limited only to the corporate sector. And insurance also induces people to save over a long period, creating prosperity and stable retail led money markets.
“These events such as successful IPOs and mergers aren’t really creating the opportunity, but they are actually recognising the fact that the sector has unlimited potential,” added Roy.

80% of Indians with no life cover

Over 80% of Indians do not have any form of health insurance, according to a recent report in Indian newspaper The Hindu Times.

ICICI Prudential Life Insurance Company was originally a joint venture between ICICI Bank and Prudential plc. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory and Development Authority of India (IRDAI).

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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