HDFC Life

HDFC Standard Life OFS proposes to sell up to 3,60,00,000 equity shares on May 3, 2019 for non-retail investors only and on May 6, 2019, for retail investors and for non-retail investors who choose to carry forward their un-allotted bids. The floor price of the offer is set at Rs 390 per share, which will aggregate up to Rs 1404 core. The HDFC Standard Life OFS represents 1.78% of the total issued and paid-up equity share capital of the company.

About HDFC Life OFS

Issue Period03-05: 06-05-2019
Face Value Rs.10
Last MP Rs. 417
Floor Price Rs. 390
Base Offer (shares)36000000
Size in Rs. Cr.1404
Offer Non Retail (Shrs)32400000
offer Non Retal- Rs. Cr1263.6
offer Retail (Shrs)3600000
offer Retal- Rs. Cr140
AllocationPrice Priority

Updates:

( updated at the end of day)

HDFC Life OFS cut off price after Day 1, Rs. 410.05 for retail. HDFC Life share Closing 413.25.

OFS Allocation Methodology

Retail investor shall mean individual investor places bids for Sale
Shares of total value of not more than Rs. 2,00,000/- (Rupees Two Lacs
only) aggregated across the Stock Exchanges (“Retail Investor”).
No discount is being offered to Retail Investors. 10% of the Sale Shares shall be reserved for Retail Investors subject to
the receipt of valid bids (the “Retail Category”). The Stock Exchanges
will decide the quantity of Sale Shares eligible to be considered in the
Retail Category, based on the Floor Price (defined below). Unsubscribed portion of the Sale Shares reserved for Retail Investors shall be available for allocation to the investors in the Non-Retail category choosing to carry forward their bids to T+l Day and who have not been allotted Sale Shares on T Day. However, such investors are required to indicate their willingness to carry forward their bids to T+ 1 Day. Retail Investors will have an option to place a price bid or bid at “Cut off Price”. Cut-Off Price means the lowest price at which the Sale Shares are sold, as shall be determined based on all valid bids received in Non-Retail category on T Day. Upon determining Cut-Off Price for the Retail Category, the Sale Shares reserved for such category shall be allocated to eligible bids of Retail Investors on price priority method at multiple clearing prices in accordance with the SEBI OFS Circulars. In case of excess demand in the Retail Category at the clearing price/Cut-Off Price, allocation shall be done on a proportionate basis at such clearing price/Cut-Off Price (as the case may be). Bids by Retail Investors below the Cut-Off Price shall be rejected.

Settlement shall take place on a trade for trade basis. For bids received from Non-Retail Category on T Day, non-institutional investors and institutional investors who place orders with 100% of the order value deposited upfront, settlement shall take place on a T+I Day. In the case of institutional investors who place bids without depositing 100% of the order value upfront, settlement shall be as per the existing rules for secondary market transactions (i.e., on T+2 Day). For the bids received on T+l Day, from the Retail Category and from the un-allotted non-Retail Investors who choose to carry forward their bid to T+l Day, the settlement shall take place on T+3 Day. In case of non-institutional investors and institutional investors bidding with 100% margin upfront who chose to carry forward their un-allotted bids to T+1 Day, the settlement shall take place<on T+2 Day. The allocation to the non-Retail Investors shall be at price equal to the Cut-off Price or higher as per the bids.

About HDFC Life Insurance

  • HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (‘HDFC Life’ / ‘Company’) is a joint venture between HDFC Ltd., one of India’s leading housing finance institution and Standard Life Aberdeen, a global investment company.
  • Established in 2000, HDFC Life is a leading long-term life insurance solutions provider in the country, offering a range of individual and group insurance solutions that meet various customer needs such as Protection, Pension, Savings, Investment and Health.
  • As on Jun 30, 2018, the Company had 34 individual and 11 group products in its portfolio, along with 8 optional rider benefits, catering to a diverse range of customer needs.
  • HDFC Life has presence across the country having a wide reach with 413 branches and additional distribution touch-points through several new tie-ups and partnerships comprising 163 bancassurance partners including NBFCs, MFIs, SFBs, etc and 26 partnerships within non-traditional ecosystems. The Company has a strong base of financial consultants. HDFC Life’s total agent count is ~97K
  • In 2012, HDFC Life established a wholly-owned subsidiary, HDFC Pension Management Company Ltd., to operate its pension fund business under the National Pension Scheme (NPS). And in Fiscal 2016, the Company established its first international wholly-owned subsidiary in the UAE, HDFC International Life and Re Company Ltd., to operate its reinsurance business.

HDFC Life Share Price Chart & Financial Overview

Financial Summary

Market Cap in Rs. Cr84,165
Revenue FY18 in cr32,246
Revenue 12m TTM38,360
CMP in Rs.390
Face Value10
Price / Earning (PE)65.92
Book Value28.03
Price / BV13.91
ROCE %30.58%
ROE  %25.83%
Dividend Yield0.32%
Sales 3 yr CAGR5.82%
Debt / Equity Ratio0
52 week High/Low548.25 / 344.40

HDFC Life OFS: Salient points and Assessment

  • HDFC Standard Life Insurance is aimed to bring Combined promoter holding to fall below 75% post OFS.
  • HDFC Standard Life Insurance delivered a stable performance, in Q4FY19. Renewal premium growth stood at 13% YoY whereas for FY2019, they stood at 17% YoY. Persistency ratios were largely stable..
  • HDFC Life’s overall APE grew at a bit slower rate of 13.2% YoY. The individual APE growth saw slower growth at 6.3% but there was strong growth in Annuity and protection segments.
  • Annual premium equivalent (APE) is a measure which is used for comparing life insurance revenue by normalizing policy premiums into equivalent of regular annual payments. This is useful when the sales contain both single premium as well as regular premium business.
  • Margins maintained healthy uptrend and stood at 24.6% from 23.2% in FY18
  • Choosing of private players for pension schemes has opened a huge opportunity for HDFC Life.
  • HDFC Life is not cheap and runs the risk of risks of a higher tax rate on account of any regulatory changes, in terms of tax rate on life insurance business. The immediate trend may depend a lot on outcome of General elections in this month.
  • Cut-off price will be determined based on the bids received on T Day
  • Bidding in OFS opportunities like HDFC Life OFS is challenging for retail investors because of the need to may money upfront and change in bid price by large investors at the last moment. Hence chances of allotment many times is difficult.
  • HDFC Life OFS floor price at Rs 390 which at some discount to the prevailing HDFC Life share price but the prices in such case adjust quickly and stock had a good run in last one month.
  • HDFC Life has shown a uptrend in last one month. I intend to apply in HDFC Life OFS only in limited quantity only for arbitrage if any as risk reward is not as good as earlier HDFC Life OFS in March 2019. The markets may witness high volatility as election results approach depending on perception of market players. HDFC Life is not oin F&O inlike ICICI Pru Life whose OFS resulted in good gains for investors.
  • With HDFC Life OFS size at 1404 crore is only 40% of the last OFS, the issue could see good response & interest from investors who made good in ICICI Pru Life OFS
  • Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.