Article

The New India Assurance Company Ltd- IPO Note

31 Oct 2017 Nikita Bhoota

Issue Opens- November 1, 2017

Issue Closes- November 3, 2017

Face Value- Rs 5

Price Band- Rs 770- 800

Issue Size - Rs 9,467 cr

Public Issue: 1,200 lakh shares (at upper price band)

Bid Lot - 18 Equity

Issue Type- 100% Book Building

Employee and Retail Disc. - Rs 30

 

% shareholding

Pre IPO

Post IPO

Promoter

100.0

85.0

Public

0.0

15.0

 

Source: RHP

Company Background

New India Assurance Company Limited (NIA) is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as on March 2017 (CRISIL). It has 2,452 offices across 29 States and 7 Union Territories and has presence in 28 other countries, as of June 2017. Its insurance products can be broadly categorized into fire insurance, marine insurance, motor insurance, crop insurance, health insurance and other insurance products. As of FY17, NIA had issued 2.71 Cr policies across all our product segments, the highest among all general insurance companies in India. The company has maintained market leadership across all major segments with 15% market share in terms of gross direct premium. Its gross written premium in FY17 was Rs 23,230.5 Cr. Its solvency ratio as on March 2017 was 2.22 and its operating expense ratio of 20.4% for FY17 was lowest among the top 10 multi-product insurers in India.

Offer Details

The offer consists of fresh issue of up to 240 lakh shares aggregating up to Rs 1,821/ Rs 1,893 Cr at lower/upper end of the price band and Offer for Sale of up to 960 lakh shares aggregating up to Rs 7,286/ Rs 7,574 Cr at lower/upper end of the price band. There is a discount of Rs 30 offered to eligible employees and retail individual bidders.  

The net proceeds from the offer will be utilized towards meeting future capital requirements, which are expected to arise from the growth and expansion of business, improving solvency margin and consequently solvency ratio.

Key Points

  1. As per CRISIL, NIA had the largest market share of 15.0% of gross direct premium among general insurers in India (FY17). This is despite of significant competition from private sector players in Indian general insurance market. The company has market leadership across segments with its gross direct premium from fire, engineering, aviation, liability, marine, motor and health insurance representing a market share of 19.1%, 21.9%, 29.6%, 18.2%, 21.0%, 15.1% and 18.4%, respectively, of total gross direct premium in these segments in India in FY17.

  2. NIA has developed an expansive multi-channel distribution network that includes individual and corporate agents (~42% of gross direct premium, FY17), brokers (~26%), bancassurance partners (~1%) and other intermediaries, as well as direct sales (~31%) and sales through online channels. As of June 30, 2017, its distribution network included 68,389 individual agents and 16 corporate agents. We believe that its diversified distribution and sales network reduces dependency on any single distribution channel and provides access to wide range of customers across geographies, segments, and demographics.

Key Risks

  1. Any significant variation between actual claim payments from the assumptions and estimates used in the pricing of, and setting reserves for, various insurance products, may have a material adverse effect on NIA’s business, financial condition and results of operations.

  2. Any termination or adverse change in relationship or arrangements with agents, brokers, bancassurance partners or other distribution intermediaries, or a decline in their productivity, may have a material adverse effect on business, financial condition and results of operations.

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The New India Assurance Company Ltd- IPO Note

31 Oct 2017 Nikita Bhoota

Issue Opens- November 1, 2017

Issue Closes- November 3, 2017

Face Value- Rs 5

Price Band- Rs 770- 800

Issue Size - Rs 9,467 cr

Public Issue: 1,200 lakh shares (at upper price band)

Bid Lot - 18 Equity

Issue Type- 100% Book Building

Employee and Retail Disc. - Rs 30

 

% shareholding

Pre IPO

Post IPO

Promoter

100.0

85.0

Public

0.0

15.0

 

Source: RHP

Company Background

New India Assurance Company Limited (NIA) is the largest general insurance company in India in terms of net worth, domestic gross direct premium, profit after tax and number of branches as on March 2017 (CRISIL). It has 2,452 offices across 29 States and 7 Union Territories and has presence in 28 other countries, as of June 2017. Its insurance products can be broadly categorized into fire insurance, marine insurance, motor insurance, crop insurance, health insurance and other insurance products. As of FY17, NIA had issued 2.71 Cr policies across all our product segments, the highest among all general insurance companies in India. The company has maintained market leadership across all major segments with 15% market share in terms of gross direct premium. Its gross written premium in FY17 was Rs 23,230.5 Cr. Its solvency ratio as on March 2017 was 2.22 and its operating expense ratio of 20.4% for FY17 was lowest among the top 10 multi-product insurers in India.

Offer Details

The offer consists of fresh issue of up to 240 lakh shares aggregating up to Rs 1,821/ Rs 1,893 Cr at lower/upper end of the price band and Offer for Sale of up to 960 lakh shares aggregating up to Rs 7,286/ Rs 7,574 Cr at lower/upper end of the price band. There is a discount of Rs 30 offered to eligible employees and retail individual bidders.  

The net proceeds from the offer will be utilized towards meeting future capital requirements, which are expected to arise from the growth and expansion of business, improving solvency margin and consequently solvency ratio.

Key Points

  1. As per CRISIL, NIA had the largest market share of 15.0% of gross direct premium among general insurers in India (FY17). This is despite of significant competition from private sector players in Indian general insurance market. The company has market leadership across segments with its gross direct premium from fire, engineering, aviation, liability, marine, motor and health insurance representing a market share of 19.1%, 21.9%, 29.6%, 18.2%, 21.0%, 15.1% and 18.4%, respectively, of total gross direct premium in these segments in India in FY17.

  2. NIA has developed an expansive multi-channel distribution network that includes individual and corporate agents (~42% of gross direct premium, FY17), brokers (~26%), bancassurance partners (~1%) and other intermediaries, as well as direct sales (~31%) and sales through online channels. As of June 30, 2017, its distribution network included 68,389 individual agents and 16 corporate agents. We believe that its diversified distribution and sales network reduces dependency on any single distribution channel and provides access to wide range of customers across geographies, segments, and demographics.

Key Risks

  1. Any significant variation between actual claim payments from the assumptions and estimates used in the pricing of, and setting reserves for, various insurance products, may have a material adverse effect on NIA’s business, financial condition and results of operations.

  2. Any termination or adverse change in relationship or arrangements with agents, brokers, bancassurance partners or other distribution intermediaries, or a decline in their productivity, may have a material adverse effect on business, financial condition and results of operations.

Research Disclaimer