SBI Life Insurance Co Ltd, a joint venture between State Bank of India Ltd and BNP Paribas Cardif, on Monday filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) for an initial public offering.
The public issue comprises a sale of 120 million shares, representing a 12% stake dilution on the post-offer basis. SBI plans to sell 80 million shares and Cardif the remaining. The IPO is likely to hit the market by the end of 2017 or early 2018.
The total issue size is estimated to be Rs 6,500-7,000 crore ($1.01-1.10 billion), two persons with direct knowledge of the matter told VCCircle.
VCCircle had reported that the life insurer had picked eight merchant bankers for the stake sale as part of SBI’s plan to monetise non-core assets by listing some of its subsidiaries.
SBI, the country’s largest lender by assets, had earlier approved a 10% stake dilution but in May raised the limit to 12% following a board decision. Cardif earlier planned to sell 2% compared with the 4% take dilution proposed now.
SBI owns a 70.1% stake in the insurer while the Dutch partner holds 26%.
SBI’s board, in March this year, had given in-principle approval to initiate the IPO of its life insurance arm.
SBI Life will be the second life insurer to float an IPO. ICICI Prudential Life Insurance Co Ltd made its trading debut
in September last year. Its shares have risen by roughly 42% since the debut, taking its market capitalisation to around Rs 68,009.56 crore ($10.55 billion).
Two other insurers are also planning to float IPOs. These are HDFC Standard Life Insurance Co and ICICI Lombard General Insurance Co.
Here’s a snapshot of SBI Life’s proposed IPO:
Parent firm SBI will sell an 8% stake while JV partner Cardif will sell 4%. There is no fresh issue of shares, so SBI Life will not get any money.
The issue size of Rs 6,500-7,000 crore would value SBI Life as much as Rs 58,333 crore, far higher than the Rs 46,000 crore valuation it elicited when SBI sold a 3.9% stake to Singapore state investment firm Temasek Holdings and private equity giant KKR & Co for Rs 1,794 crore in December 2016.
SBI Life has appointed JM Financial Institutional Securities, Axis Capital, BNP Paribas and Citigroup, among eight merchant bankers, for the IPO.
Other names include Deutsche Equities India, ICICI Securities, Kotak Mahindra Capital Co and SBI Capital Markets.
SBI and SBI Life have appointed Cyril Amarchand Mangaldas law firm as their Indian counsel and Squire Patton Boggs Singapore LLP as their international counsel.
Khaitan & Co law firm is the Indian counsel representing the merchant bankers. Milbank, Tweed, Hadley & McCloy LLP is the international counsel to BNP Paribas, Citigroup and Deutsche.
AZB & Partners is the Indian counsel to BNP Paribas Cardif.
SBI Life was incorporated as a JV between SBI and BNP Paribas Cardif in 2001.
It is the second-biggest life insurance company behind state-owned Life Insurance Corporation of India.
According to an analysis by ratings firm CRISIL, SBI Life’s market share in new business premium was 20.04% in financial year 2016-17.
Its embedded value stood at Rs 16,538 crore as on 31 March 2017. Its new business value stood at Rs 1,036 crore in 2016-17.
As of 30 June 2017, SBI Life had a product portfolio of 37 individual and group offerings, including a range of protection and savings products.
The firm’s individual offerings include participating products, non-participating protection products, other non-participating products and unit-linked products, which contributed 10.77%, 0.95%, 1.69% and 50.36%, respectively, of its new business premium in financial year 2016-17.
At the end of financial year 2015-16, its market share stood at 5.1% in the life insurance industry, second behind LIC’s 70.4%. Its peer ICICI Prudential had a 4.88% market share in terms of premium collected.
SBI reported a net profit of Rs 954.65 crore for 2016-17 on earnings of a net premium of Rs 20,852.45 crore, according to its draft prospectus.
For 2015-16, SBI Life earned a net premium of Rs 15,665.45 crore compared with Rs 12,780 crore in the previous year.
The company reported a net profit of Rs 844.10 crore in 2015-16 compared with Rs 814.86 crore in the previous year.