SBI Life Insurance IPO Opens Today, Should You Invest?

SBI Life Insurance IPO of Rs 84,000 crore is set to open. The IPO is valued on the higher side but it appeals long term investors. Long term investors envisage huge business growth and are interested in life insurance sector.

THE FINANCIALS AND THE BUSINESS

According to new business premium, SBI Life was the top most private insurer in the country in 2017. It had a market share of 20%. The company earns two-third of its new business premium through bancassurance channel. According to a recent research report by CRISIL, the new business premium shall see a growth of 11-13% during 2017-2022 which was averaged at 9% for last five years.

A sharp increase of 19.2% was seen in company’s income annually which increased to 30,277.5 during 2013 to 2017. During this period the profit increased by 10.9% to reach 954.6 crores. For the year 2017, the operating expanses ratio fall down to 7.8% which was 9.1% in 2015. This signifies the prudence in operations of the company.In the year 2017, the persistency ratio for a period of 61 months turned out to be 67.2% which indicates the trust shown by the customers of the company.

THE VALUATION

For a share price of Rs 700 during the last 12 months, the Price-Earning ratio is 73.3 and the price to book value ratio is 2.6. This IPO is relatively overpriced as ICICI prudential poses tough competition which is having Price-Earning ratio at 37 and book value ratio of 10.

The premium valuation is being justified on the grounds of higher incremental market share gain and hence the experts are recommending the investors to subscribe with a long term perspective. It may however, not turn out to be a good idea to subscribe with the intention of making listing gains. Analysts believe that the company holds a leadership position and hence shall be able to attract adequate investors.

THE ISSUE DETAILS

IPO open date: 20-09-2017

IPO close date: 22-09-2017

IPO lot size: 21 shares

Face value of share: Rs 10 per share

Issue price band: Rs 685-Rs 700 per share

Leading Managers: Axis Capital,Citi Global Markets,  BNP Paribs, Deustsche equities, JM Financials, Kotak Securities and ICICI securities