Capital market rating of 49/100 for ICICI Prudential Life Insurance Company Ltd implies a Subscribe rating.
First life insurance company to tap public.
Valuation
For shareholders, the company has earned a PAT of Rs 405.02 crore and 1653.09 crore, respectively, for the June 2016 quarter and for the 12 months ended FY 2016. This gives an EPS of Rs 11.5 for FY 2016 on an equity share capital of Rs 1435.32 crore.
ICICI Bank in November 2015 raised Rs1950 crore by selling 8.6 crore shares (6% of share capital) to high pedigree investors such as Azim Premji and Temasak Holdings at Rs 226 per share, valuing the insurer at Rs.32500 crore
The company has a strong capital position, with a solvency ratio of 320.0% at March 31, 2016, compared to the IRDAI-prescribed control level of 150.0%. Thus, it is unlikely to need any capital infusion in the immediate future. However, existing shareholders will dilute their stake further.
At the upper band, the company is valued at around Rs 479396 crore. The embedded value (EV) as on March 2016 stood at Rs 139400 crore. The company is valued at 3.4 times EV. The company is able to consistently generate ROE in excess of 30% in the last five years.
The company fares well on most financial, operational and valuation parameters compared to Max Life (which is part of listed Max Financial Services) and which is planned to be merged with HDFC Standard Life. Upon the completion of merger, the combined HDFC and Max life can command a higher market share than ICICI Prudential Life.
For retail investors, insurance is a totally new industry and its financial and operational parameters will be too technical for most of them to understand and appreciate. Institutions, especially FIIs, will largely determine the company's fortunes on the bourses after listing.
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