India Poised for IPO Record as Insurers Rush New Deals to Market

  • First-time share sales set to reach $7.8 billion this year
  • HDFC Standard Life, SBI Life to sell stock as industry grows

UBS Head of India Research Gautam Chhaochharia discusses the Indian IPO market. He speaks on 'Bloomberg Markets.' (Source: Bloomberg)

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Indian initial public offerings are headed for a record year, as a rush of insurers seek to ride a rally in the local market and tap increasing investor demand for financial assets.

At least four Indian insurers are aiming to price stock offerings by the end of 2017, according to people familiar with the matter. Total fundraising from first-time share sales in the country could rise to 500 billion rupees ($7.8 billion) this year, Ajay Saraf, head of investment banking at India’s No. 1 IPO underwriter ICICI Securities Ltd., said in an interview. 

That would represent about an 85 percent increase from 2016 and surpass the record tally of 363 billion rupees set in 2010, data compiled by Bloomberg show. HDFC Standard Life Insurance Co. is planning to seek as much as 100 billion rupees in an IPO, while a potential offering from SBI Life Insurance Co. could total about 85 billion rupees, the people said, asking not to be identified because the information is private.

Firms are seeking to take advantage of a surging Indian equity market where there is a dearth of insurance stocks for investors looking to diversify their holdings in the financial industry. The offerings follow the Indian parliament’s 2015 vote to increase the amount foreign investors can own in the nation’s insurers to 49 percent from 26 percent.

“Everyone is in a rush to tap the market before the froth starts settling,” Rethish Varma, a Bengaluru-based researcher at MarketSmith India, said by phone. “After the rule change, founders backing insurers were trying to cash in on part of their stakes, and the current bull run offers that opportunity.”

Only one pure-play insurer IPO has ever priced in Mumbai, a 60.6 billion-rupee deal from ICICI Prudential Life Insurance Co. Shares of the company have risen 28 percent since they began trading in September. 

A local stock market that’s been trading at record highs for months has already attracted 221 billion rupees of first-time share sales this year, twice the volume of deals done during the same period in 2016, data compiled by Bloomberg show. Amid this rally, New India Assurance Co. is also planning an IPO that could raise about 105 billion rupees, while General Insurance Corp. of India is preparing a share sale of around 120 billion rupees, people familiar with the matter said.

“This year will be marked by insurance capital raisings,” said Sachin Wagle, the India head of global capital markets at Morgan Stanley. “A few of the leading franchisees in life, as well as non-life insurance, have achieved scale and started delivering consistent profitability.”

Representatives for HDFC Standard Life, SBI Life, New India Assurance and General Insurance Corp. didn’t immediately respond to requests for comment.

HDFC Standard Life filed a draft prospectus Aug. 18 with the Indian capital markets regulator. Housing Development Finance Corp., India’s largest mortgage lender, and Standard Life Plc have agreed to sell shares in the offering, which is being arranged by banks including Morgan Stanley, HDFC Bank Ltd., Credit Suisse Group AG, Citic CLSA and Nomura Holdings Inc.

SBI Life, the insurance arm of India’s biggest bank, lodged its preliminary offering documents last month. A rapidly expanding economy and rising incomes will contribute to continued growth in the insurance sector in India, which only accounts for 1.5 percent of premiums globally despite being the world’s second most populous nation, according to Kisan Ratilal Choksey Shares & Securities Pvt. 

“We expect a lot of interest from quasi-sovereign funds and large pension funds for these share sales,” said ICICI’s Saraf, who wasn’t referring to a specific deal. “Insurance is a largely under-penetrated sector, and the growth potential is pretty substantial.”

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