HDFC Life IPO nears halfway mark on day 1; GIC, Tata’s UC-RNT fund among anchors

By Ankit Doshi

  • 07 Nov 2017
Credit: Thinkstock

India’s third-largest private sector life insurer HDFC Standard Life Insurance Co. Ltd’s maiden public offering nearly reached the halfway mark on the first day of the issue on Tuesday led by institutional investors.

The public offering of 219.76 million shares, excluding the anchor portion, received bids for 100.34 million shares, stock exchange data showed. The book was subscribed 46%.

Qualified institutional buyers’ (QIB) portion was subscribed 1.4 times of the 53.37 million shares on offer. A large chunk of the shares was bid by foreign institutional investors.

Foreign institutions were net buyers of Indian shares on Tuesday as benchmark indices fell more than 1%.

Retail investors, whose bid value cannot exceed Rs 2 lakh per application, bid for 14% the 93.41 million shares set aside for them. Non-institutional investors, comprising corporate bodies and high net-worth individuals, bid for 22% of shares reserved for them.

Ahead of its initial public offering on Monday, the company raised Rs 2,322 crore ($359 million) from anchor investors, including the sovereign wealth funds of Singapore, Kuwait and Abu Dhabi.

India’s third-largest life insurer in the private sector sold about 8.07 crore shares to 76 anchor investors at the upper end of the Rs 275-290 price band fixed for the IPO, which opened today.

Apart from Singapore’s GIC Pte Ltd, Abu Dhabi Investment Authority, and Kuwait Investment Authority, another anchor investor included UC-RNT Fund, the joint investment platform of Tata Sons chairman emeritus Ratan Tata and the University of California. A bunch of insurance companies, mutual funds and foreign institutional investors also came in as anchor investors.

HDFC Standard Life is seeking to raise Rs 8,695 crore ($1.34 billion) via the IPO at a valuation of Rs 58,260.22 crore. The public offering will close on 9 November.

The insurer joins a growing number of Indian insurance firms – life and non-life – that have either firmed up plans for a public offering or already gone public. These include General Insurance Corporation (GIC Re), SBI Life Insurance Co, ICICI Lombard General Insurance, New India Assurance and Reliance General Insurance Co.

ICICI Prudential Life Insurance became the first life insurer in India to go public last year.

HDFC Life, which counts Azim Premji’s private investment arm PremjiInvest as an investor, will sell 299.82 million shares. The proposed issue comprises an offer for sale by its joint venture partners – mortgage lender HDFC Ltd and UK-based Standard Life Plc. The two partners will be selling a total of 14.97% stake in the IPO.

HDFC owns 61.65% and Standard Life 35% of the insurer, while minority shareholders hold the remaining. Mortgage lender HDFC Ltd’s shares declined 1.12% on the BSE on Tuesday at Rs 1,764.25 apiece.

HDFC Standard Life filed its draft red herring prospectus  with SEBI on 19 August. It received regulatory nod on 13 October.

The IPO comes after its plans for a merger with billionaire Analjit Singh-promoted Max Financial Services Ltd hit a regulatory hurdle.

A public listing was HDFC Life’s initial plan. Subsequently, HDFC and Max Financial began exploring a merger of their insurance businesses, which would have resulted in India’s largest private sector life insurer with an annual premium worth Rs 25,500 core, surpassing ICICI Prudential Life Insurance Co. Ltd. They, however, failed to get the approval of the Insurance Regulatory and Development Authority of India (IRDA) for the amalgamation. After IRDA raised objections, both the companies said they would file a revised merger structure with the insurance regulator.

As VCCircle reported in May, simultaneous life insurance IPOs were forcing merchant banks to be choosy as they cannot represent two insurers at the same time.

To manage the IPO, HDFC Life has picked as many as 10 bankers, including the eight that were named by VCCircle in July.

Morgan Stanley, HDFC Bank, Credit Suisse, CITIC CLSA and Nomura are the global coordinators and book running lead managers. Edelweiss, Haitong, IDFC, IIFL and UBS are the other merchant bankers involved in the issue.

HDFC Standard Life, which operates under the banner of HDFC Life, was the first private life insurer to be created way back in 2000. Standard Life hiked its stake in the firm two years ago soon after the foreign investment limit in the insurance sector was raised.

In December 2014, PremjiInvest had picked up close to 1% stake in the firm for Rs 200 crore, valuing the firm at Rs 21,000 crore. Standard Life had hiked its holding almost one year later, valuing the firm at around Rs 19,000 crore.