April 13, 2018
admin
Short Note about the Company:
Reliance General is one of the leading private-sector general insurance company’s in India. Based on its gross direct premium income (“GDPI”) for the quarter ended June 30, 2017, it is among the five largest private sector general insurance companies in India, according to the ICRA Report.
Its competitive strengths:
*Comprehensive Product Suite
*Extensive Multi-Channel Distribution Network
*Customer-centric Sustainable Business Model
*Strong Financial Position
*Strong IT Infrastructure
*Robust Enterprise Risk Management Framework
*Proficient Senior Management
( Detailed note about General Insurance sector and about this company is given in Page bottom box)
The promoters :
Reliance Capital ltd
Main objects of the issue are :
The objects of the Fresh Issue are to augment the solvency margin and consequently increase the solvency ratio of our Company, to meet the Company’s future capital requirements which are expected to arise out of growth in its business. In addition, it believes that the listing of its Equity Shares will enhance its visibility and brand name among existing and potential customers.
IPO Particulars:
IPO Opens on : ?
IPO Closes on 😕
Issue Type: Book Built Issue IPO
INITIAL PUBLIC OFFERING OF UP TO 670,79,979 EQUITY SHARES OF FACE VALUE OF Rs. 10 EACH (“EQUITY SHARES”)FOR CASH
Face Value: INR 10 per share
Price Band: Per Equity Share: Not declared
Minimum Order Quantity: ?
Listing will at: BSE,NSE
Shares offered to
Anchors(30%) ? Shares = INR ? Crs
QIB (20%) ? Shares = INR ?Crs
NII (15%) ?Shares = INR ?Crs
RII (35%) ?Shares = INR ?Crs (Lot size: 20 = ? Forms)
Tentative timeTable:
? – Price Band announced
? – Anchor List
? – Offer Opens
? – Offer Closes
?– Finalisation of Basis of Allotment
?– Unblocking of ASBA
?– Credit to Demat Accounts
?– Listing on NSE & BSE
Financials:
Total Income of 2016-17 INR 149.18Crore
Total Income of 2017-18(3M) INR 52.79 Crore
Net Profit of 2016-17 INR 122.34 Crore
Net Profit of 2017-18 (3M) INR 35.08 Crore
Earnings per Share (EPS) INR 5.12
Earnings per Share 2017-18 (3M) INR 1.76
Equity Capital as on 30.6.2017 INR 125.78 Crore
Equity Capital after the IPO: 322,141,400 shares Rs. ?
Upper Price Band/last EPS: ?
Book Value of the Share as on 30.06.2017 INR 51.50
Upper offer price/Book Value Ratio:
Return on Net Worth: 10.24%
Peer Comparison:
ICICI Lombard General Insurance Ltd
PE: 43.49
P/BV: 8.21
Lead Managers:
Motilal Oswal Investment Advisors Limited
Credit Suisse Securities (India) Private Limited
Edelweiss Financial Services Limited
UBS Securities India Private Limited
Haitong Securities India Private Limited
IDBI Capital Markets & Securities Limited
Registrar to the IPO:
Karvy Computershare Private Limited
Registered Office of the Company :
H Block, 1st Floor, Dhirubhai Ambani Knowledge City, Navi Mumbai 400710, Maharashtra, India
IPO Analysis by Experts / Fund Managers
The Indian economy is one of the largest economies in the world, with a gross domestic product (“GDP”) on purchasing power parity basis of an estimated US$8.72 trillion in the calendar year 2016. Per capita GDP in India has grown from an estimated US$5,500.00 in the calendar year 2013 to an estimated US$6,700.00 in the calendar year 2016. India has the second largest population base in the world and a higher GDP growth as compared to the population has led to an improvement in the per capita GDP. The improvement in the overall economy and the income levels backed by improved performance of the corporate sector are likely to contribute to the growth of the general insurance sector.
The Indian insurance industry recorded a significant growth and saw the introduction of various products primarily after the liberalization period, prior to which it comprised of only the state insurance players, Life Insurance Corporation of India and General Insurance Corporation of India
By the end of the first quarter of the financial year 2018, the industry comprised a total of 55 insurance players, with 24 life insurance companies and 31 general (non-life) insurance companies. While the life insurance new business premiums grew by 26%, the non-life insurance premiums grew by 30% supported by health, agriculture and motor businesses during the financial year 2017. The industry outlook continues to be positive given the initiatives by the government to develop the agriculture, liability and credit insurance lines of businesses coupled with the rising disposable incomes, which would increase demand for the personal categories of insurance products.
The general insurance industry is led by the four public sector insurers, New India Assurance Company Limited, United India Insurance Company, National Insurance Company Limited and Oriental Insurance Company Limited. Insurance companies such as ICICI Lombard General Insurance, Bajaj Allianz General Insurance, HDFC ERGO General Insurance, IFFCO Tokio General Insurance, and Reliance General Insurance together comprise about two-thirds of the private sector general insurance market. Further, the industry has two specialized public sector insurers, Agriculture Insurance Company Limited for crop insurance and Export Credit Guarantee Corporation of India for credit insurance and five private sector insurers which underwrite policies exclusively in health, personal accident and travel insurance segments.
The size of India’s general insurance sector is ‘ 1.20 lakh crore on a Gross Direct Premium Written (“GDPW”) basis during the financial year 2017. The general insurance sector is mainly comprised of motor, health, crop, fire and marine insurance products among other products such as engineering, aviation, and liability, with motor insurance comprising about 43% and health and personal accident insurance comprising about 24% of the GDPI during the financial year 2017. The crop insurance product has seen a rapid growth in the financial year 2017 owing to the new insurance scheme, Pradhan Mantri Fasal Bima Yojana (“PMFBY”), launched by the government during the financial year 2016, which was implemented by multiple insurance players from the Kharif season starting July, 2016.
The size of the general insurance industry in 2016 was USD 2.12 trillion (as against USD 2.05 trillion in 2015) with North America contributing approximately 40%, while Europe contributed approximately 30% and Asia accounted for approximately 22% of the overall business. The global general insurance industry which grew at a CAGR of 1.6% over last five years bounced back in 2016, after a poor performance in 2015 with a 3.14% growth in the general insurance premiums as against a contraction of 2.30% in the previous year. The developing economies (as per UN’s classification) grew at a faster pace at 6.8% in 2016 as compared to the developed economies, which grew at 2.7%.
India, which accounted for 4% of the premiums in the Asian markets, grew at a faster pace of 15.28% compared with the global average and the average across Asian counties. Growth of the Indian general insurance is expected to remain above the Global and the Asian average given the low penetration, density and the evolving regulations aimed at improving insurance coverage.
Reliance General is one of the leading private-sector general insurance company’s in India. Based on its gross direct premium income (“GDPI”) for the quarter ended June 30, 2017, it is among the five largest private sector general insurance companies in India, according to the ICRA Report. It offers a comprehensive and well-diversified range of insurance products in the motor, weather and crop, health, fire and engineering, and marine insurance sectors, as well as in other miscellaneous insurance business lines, which it provides through multiple distribution channels. In the financial year 2017, it issued over 4.10 million policies and its total GDPI was Rs 39,353.51 million. GDPI for the financial year 2017 included: Rs 19,626.52 million, or 49.9% of total GDPI, from motor insurance, Rs 10,894.35 million, or 27.7% of total GDPI, from weather and crop insurance, Rs 3,443.30 million, or 9.7% of total GDPI, from health insurance, Rs. 3,529.66 million, or 9.0% of total GDPI, from fire and engineering insurance and Rs. 499.93 million, or 1.3% of total GDPI, from marine insurance. It also participates in a number of insurance schemes promoted by the Government, notably in respect of weather insurance, crop insurance and mass health insurance.
According to the ICRA Report, Its distribution network comprised the highest number of individual agents of any private sector company in the general insurance industry in India
Reliance General Insurance is promoted by Reliance Capital Limited, an RBI registered non-banking finance company with business interests in asset management and mutual funds, life insurance, commercial lending, home finance, stock broking, wealth management services, distribution of financial products, asset reconstruction and proprietary investments, in addition to general insurance.
Its GDPI has increased at a compound average growth rate (“CAGR”) of 18.3% to Rs 39,353.51 million in the financial year 2017 from Rs. 20,100.06 million in the financial year 2013. Its net profit after tax has increased to Rs. 1,287.28 million in the financial year 2017 from a loss of Rs 372.80 million in the financial year 2013. Its solvency ratio as at June 30, 2017 was 1.70x compared to the IRDAI-required control level of 1.50x.
As a general insurance company, in accordance with applicable regulations, it generally receives premiums significantly prior to when it is required to make payments in settlement of claims, which follows the reporting and processing of such claims. This leave it with investible assets for the intervening period which it is required to invest in accordance with IRDAI Investment Regulations. Its investment policy is designed with the objective of effectively investing, supervising, monitoring and evaluating all activities pertaining to fund management. As of June 30, 2017 and March 31, 2017, it had an investment portfolio of Rs.68,878.53 million and Rs. 67,242.66 million, respectively. Its investment portfolio increased at a CAGR of 19.9% between March 31, 2013 and March 31, 2017. In the financial year 2017, its investment portfolio generated yield on average investments (including unrealized gains) of 9.0%. Debt investments made up 98.9% and equity investments 1.1% of its total investments as at March 31, 2017.
In the financial year 2017, motor, weather and crop, health, fire and engineering, marine, and other products contributed 49.9%, 27.7%, 9.7%, 9.0%, 1.3% and 2.5%, of its GDPI respectively.
In the financial year 2017 it sold over 4.10 million policies including, over 3.50 million motor insurance policies and over 200,000 health insurance policies.
Extensive Multi-Channel Distribution Network
As at June 30 2017, its extensive multi-channel distribution network comprised over 25,200 individual and 28 corporate agents (including both public and private sector banks and NBFCs) as well as a significant number of brokers, bancassurance partners (including NBFCs) and other intermediaries such as web aggregators, and was supported by 129 branches in 112 cities, across 25 states and union territories in India. According to the ICRA report, its distribution network comprised the highest number of agents of any private company in the general insurance industry in India. For the financial year 2017, GDPI generated from its individual agents, brokers and corporate agents contributed 31.8%, 19.0% and 4.1%, respectively, of its total GDPI, while direct sales contributed 45.1% of its GDPI.
Financials
Its net worth increased at a CAGR of 14.7% from Rs 7,265.91 million as of March 31, 2013 to Rs.12,569.12 million as of March 31, 2017. It has maintained a strong balance sheet, its solvency ratio as of March 31, 2017 was 1.68x against minimum statutory requirement of 1.5x.
Its GDPI has increased at a CAGR of 18.3% to Rs.39,353.51 million in the financial year 2017 from Rs. 20,100.06 million in the financial year 2013. Its net profit after tax has increased at a CAGR of 12.5% to Rs.1,287.28 million in the financial year 2017 from a loss of Rs 372.80 million in the financial year 2013. It has declared dividends (including dividend distribution tax) of Rs.75.69 million during the financial year 2017.
It also retains a conservative reserving policy, which is exemplified by its technical reserves to net premium ratio of 2.25x for March 31, 2017 and the financial year then ended, compared to the Indian private-sector general insurance average of 1.43x for the same date and year.