The ICICI Prudential IPO, set at a price band of Rs 300-334, will be the biggest IPO since Coal India’s Rs 15,200-crore listing in October 2010. The IPO could value ICICI Prudential Life at nearly Rs 40,000 crore, which is almost 25% higher than the valuation when ICICI Bank sold a 6 per cent stake in November 2015 to Azim Premji and Temasek.
75% of ICICI Pru Life’s business come from unit-linked insurance plans (ULIPs). ICICI Bank, which owns nearly 68 percent of the insurer, is selling up to 181.34 million of its shares in the IPO.
The ICICI Prudential IPO is just the first of upcoming insurance IPOs. The insurance regular IRDA plans to mandate all companies with about 10-year history in life insurance and eight years in health insurance to list on stock exchanges within three years.
India is the 10th largest insurance market in the world and the fifth largest in Asia, but IRDA has long been concerned about low penetration in the sector. Life insurance penetration in India is less than 3%, compared to a global average of 3.5%. The regulator believes that compulsory listing will increase transparency and boost customer confidence in purchasing insurance, and also increase competition in the sector through better outreach efforts.
Currently the insurance sector, which had opened to private firms in 2000, has 54 insurance companies. Growth has been in double-digits - there was 12% growth in life insurance and 14% growth in non-life insurance, while the health insurance sector grew by 40%.
So far however, Indian insurance companies have moved slowly in the listing process, Besides HDFC Life's backdoor listing through MaxLife and ICICI Prudential's upcoming IPO, SBI Life has expressed interest in listing but not taken any action.
Soon however, they will have no choice. Around 32 of India's life and general insurance companies have been in operation for ten years. IRDA regulations will require insurers to take up listing discussions with boards within three months of the new guidelines, and file a IPO roadmap within 45 days of board approval. Firms will have a maximum of three years to list. Insurance firms with distribution tie-ups with banks (the way ICICI Prudential does), will have better valuations and are likely to gain customers more easily through cross-selling and outreach. Overall, the IRDA reforms will be a way for regular shareholders to gain from the growth of the insurance market in the coming years, as India catches up with the rest of the world.
