HDFC Life

HDFC Standard Life OFS comprises Base Offer Size – 7,00,00,000 shares and Additional Option to sell upto 2,95,00,000 shares ( Over subscription Option) Total Shares (Base Size + Green Shoe) 9,95,00,000.  Based offer is 3. 47 percent of the equity shares with in aggregate it amounts to 4.93 percent stake in the Insurance company. The floor price of the offer is set at Rs 357.5 per share, which will aggregate up to Rs 3,557 core.

About HDFC LifeOFS

Issue Period12-03 and 13-03-2019
Face Value10
Floor Price357
Base Offer (shares)7,00,00,000
Total with GreenShoe (shares)9,95,00,000
Total in Rs. Cr.3,552
Base offer Retail (Shrs)70,00,000
Base offer Retal- Rs. Cr250
Tot  offer Retail (Shrs)9950000
Tot  offer Retail Rs. Cr355
Allocation MethodologyPrice Priority

Updates:

HDFC Life OFS :

Day2: HDFC OFS overall retail response 84% of aggregate (includes green shoe). At cut off price 365.2- 8.5% demand., price bids above 365.2 – 5.6%. Possibly allotment should be above cut off i.e. 365.2 only but small doubt persists. This is test case for OFS allocation methodology

Day1 : HDFC Life OFS: cut-off price determined on the first day of OFS (12-Mar-2019) on the basis of bids received in the general category is Rs.365.20. retail can bid at cut off price or higher. allotment on price priority. Keep an eye on share price too before bidding. In my opinion Bids by Retail Investors below the Cut-Off Price shall be rejected. However investors are advised to check this fact independently as the instructions are not very clear and one can place bid at below the Cut off price but above the floor price.

OFS Allocation Methodology

Retail investor shall mean individual investor who 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 l 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

HDFC Life Price Chart

Financial Summary

Market Cap in Rs. Cr78,778
Revenue FY18 in cr32,246
CMP in Rs.390
Face Value10
Price / Earning (PE)62.54
Book Value26.78
Price / BV14.56
ROCE %30.58%
ROE  %25.83%
Dividend Yield0.35%
Sales 3 yr CAGR5.82%
Debt / Equity Ratio0
52 week High/Low547.25 / 345.00

HDFC Life OFS: Salient points and Assessment

  • Currently, Standard Life holds 29.2 per cent stake in the company  and this OFS will bring it below 25%.
  • Recently there was stake sale by BNP Paribas Cardif, the joint venture partner in SBI Life Insurance,
  • HDFC Standard Life Insurance reported steady Q3FY19 performance in terms of annualized premium equivalent growth, stable persist-ency and stable VNB (value of new business) margins.
  • 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.
  • In general, life insurance stocks have been under pressure on the bourses, due to their dependence on equity markets
  • 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 357 was at good discount to market price of Rs. 390.5, 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 month. This has been noticed in peer stocks like SBI Life and ICICI Pru Life also.
  • I intend to apply in HDFC OFS but will not bid for a very high price.
  • 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.