SBI Life Insurance, a subsidiary of the country's largest lender State Bank of India, will hit the capital market on Wednesday to raise up to Rs 8,400 crore.
The initial share sale offer will close on 22 September. This would be the second listing of a life insurer after ICICI Prudential Life Insurance, which went public last year.
The price band for SBI Life IPO is Rs 685-700 per equity share with a discount to eligible employees of Rs 68 per share on the offer price.
Bids can be made for a minimum of 21 equity shares and in multiples of 21 equity shares thereafter. The equity shares will be listed on the BSE and the NSE.
SBI will dilute 10 percent of its stake in the life insurance venture SBI Life through public offer.
SBI Life Insurance is a joint venture between the bank and BNP Paribas Cardif. SBI owns 74 per cent of the total capital and BNP the rest. After this stake sale, SBI's stake in the arm came down to 70.1 percent from 74 percent while BNP Paribas Cardif still holds 26 percent.
As of 31 March, SBI Life Insurance had assets under management (AUM) of Rs 97,736.6 crore, up 37 percent from a year ago. It is India’s largest private life insurer, in terms of new business premium generated in each fiscal year, since 2009-10.
The company has increased its market share of new business premium generated among private life insurers in India to 20.04 percent in 2016-17, from 15.87 percent in 2014-15.
In 2016-17, it enjoyed a market share of individual rated premium of 20.69 percent among private life insurers in India and 11.16 percent of the entire life insurance industry in India.
The company reported a profit of Rs 954.65 crore in 2016 -17, up 13 percent from the previous financial year.
The insurer has an authorised capital of Rs 2,000 crore and a paid up capital of Rs 1,000 crore.
SBI had last year sold 3.9 percent stake in SBI Life to global private equity major KKR and the Singaporean sovereign fund Temasek Holdings for Rs 1,794 crore or $264 million, valuing the country's third largest private life insurer at around Rs 46,000 crore.
According to HDFC Securities, the company has a consistent track record of rapid growth. It has a significant brand equity and pre-eminent promoters. Moreover, it has an expansive multi-channel distribution with pan-India bancassurance channel and high agent productivity.
The brokerage also noted that it has a sustainable business model driven by robust financial position, superior investment performance, diversified product portfolio and effective risk management.
HDFC Securities has, however, said the company's inability to maintain market share, implement growth strategies or effectively address the requirements of specific customer segments is a key concern. This is likely to materially and adversely affect its business operations and prospects.
Apart from this, any termination of, or adverse change in, the company's bancassurance arrangements, and especially with SBI, or a decline in performance standards of its bancassurance partners, will affect its business.
Also the brokerage has noted that a significant proportion of SBI Life’s new business premiums is generated by a certain category of products. "Any regulatory changes or market development that adversely affects the sale of such products could have a material adverse effect on its business, financial condition and results of operations," it said.
Moreover, SBI Life’s investment portfolio is subject to liquidity risk and volatility in the market value of such financial instruments and may be concentrated in certain asset classes, it said.
(With inputs from PTI)
Updated Date: Sep 20, 2017 09:05 AM