HDFC Life Insurance is the first insurance company to announce an IPO. Amitabh Chaudhry , Managing Director and Chief Executive Officer of the insurer discusses its strategy in an interview to The Hindu. Edited excerpts:
The board of HDFC Life Insurance has approved an initial public offering. When do you plan to come out with the IPO?
The earliest we can do the IPO is November but that’s an aggressive timeline. Hopefully, we can incorporate September results also if we do it in November. We are assuming all the things that need to be sorted out, will get sorted out within the timeframe we have in mind. There could be some delays and if we miss the November timeline, it will happen in January- February because in December people go for holidays.
How much stake will HDFC — the promoter — dilute during the IPO? What will be the size of the IPO?
HDFC has around 61-62 per cent stake in HDFC Life now. They will dilute minimum 10 per cent stake. HDFC (stake) will remain at over 51 per cent, post the IPO. Right now, I cannot comment on the size of the IPO.
The stock markets have been very volatile in the recent past after a bull-run post the Budget. What is your take on the markets, keeping in mind the timing of the offer?
One is a timeline based on regulatory perspective, that is, by when we receive all the approvals. The other is taking the market into account for coming out with the IPO.
There are lot of IPOs happening now, the small finance banks, healthcare companies… but we have to see whether it continues or not. We will cross the bridge when we get there.
When do you plan to file the draft red herring prospectus? Have you identified investment bankers?
We are hoping by July we will be able to file the DRHP. It’s again, an aggressive timeline. We are meeting a lot of merchant bankers but no formal appointment has been made so far.
What are the main reasons behind this public offer?
Certain (section) of our shareholders were always vocal about the fact that they want (us) to do an IPO. The regulator also wants insurance companies to list because (as) they believe, it will lead to a different level of corporate governance and market scrutiny. Of course, the market will value us differently if we are listed. This also gives us the currency to go and do acquisitions in India. If we are listed, then there is clear value one can ascribe to HDFC Life. Are you looking for acquisitions? Do you see opportunities?
I think there will be situations in India that some of the players may not like to stay for long. According to industry data, the top seven private sector players’ market share has continued to grow over a period of time.
I think in the next couple of years, there will be some players who will find it difficult to survive or continue to make money in the long-term. So, at some stage, the promoters may decide that it is better to sell out rather than continue to sustain at a low level of performance. If the acquisitions make sense, we will explore the idea.
What are the biggest challenges that you want to address before the offer?
To start with, we need to get regulatory approvals, from IRDAI and SEBI. There are some areas where regulatory rethink may be needed to make the process faster. For example, prior regulatory approval for acquiring 1 per cent stake in insurance companies by non-promoters. I think the whole approval process for non-promoters may need to be evaluated. An IPO is a reasonably long process during which we will face several challenges. We will work with relevant parties to address each challenge.
Can you throw some light on the performance in the last financial year?
Compared to the earlier financial year, the company’s overall premium collection grew by 10 per cent to Rs.16,313 crore driven by a growth of 10 per cent in individual new business premium, 30 per cent in group premium and 5 per cent in renewal premium.
The post overrun new business margins improved to 19.8 per cent and Indian GAAP profits grew by 4 per cent to Rs.818 crore. So, if the overall matrix is considered, I think it is a very satisfactory performance.
