Housing Development Finance Corp, India’s largest mortgage lender and a financial services holding company, said it will take its life insurance arm public in what could make the unit the first insurer to float an initial public offering.
HDFC said it plans to sell a 10 per cent stake in HDFC Standard Life Insurance Co Ltd through the proposed IPO. It didn’t give a timeline for the issue.
The move will allow HDFC to monetise its investments without losing control as it will continue to own a majority stake in the insurance firm.
HDFC Life is a joint venture between the Indian company and the UK’s Standard Life. Until recently, HDFC held 70.65 per cent of the insurer while Standard Life owned 26 per cent. After the government last year raised the foreign investment limit in the insurance sector to 49 per cent from 26 per cent, HDFC sold a 9 per cent stake to its foreign partner at Rs 95 a share. The transaction, completed a few weeks ago, was worth Rs 1,705 crore and valued the insurer at Rs 18,945 crore.
HDFC now holds 61.65 per cent and Standard Life 35 per cent of the joint venture, while the remaining is held by other shareholders.
A 10 per cent stake sale could fetch Rs 1,894.5 crore, based on the latest transaction.
HDFC Life reported gross premium income of Rs 16,313 crore, total income of Rs 17,954 crore and net profit of Rs 818 crore for the year ended March 31, 2016.
While HDFC Life may well become the first insurer to float an IPO in India, the holding company of another peer is already in the public domain.
Last year, Max Group’s flagship listed firm Max India underwent a corporate restructuring to vertically split itself into three separate listed companies. Max India has been renamed as Max Financial Services and is the holding company of Max Life Insurance Co Ltd. The insurer is a three-way joint venture among Max Financial, Mitsui Sumitomo Insurance and Axis Bank.
Max India’s other two business verticals—healthcare and allied businesses such as health insurance and specialty films manufacturing—will be listed entities soon.
Last year, private equity firm KKR acquired about 9.95 per cent stake in Max Financial Services in a transaction that resulted in the promoter stake falling to a little over 30 per cent. KKR is now the second-largest institutional shareholder in Max Financial behind Goldman Sachs, which owns around 15.5 per cent through two affiliates.