OneMint

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

SBI Life Insurance Company Limited is all set to enter the primary markets through its initial public offer (IPO) of Rs. 8,400 crore from September 20. The IPO is an offer for sale (OFS) by SBI Life’s promoters, State Bank of India (SBI) and BNP Paribas Cardif S.A. The company has fixed its price band in the range of Rs. 685-700 a share. Subscription to the issue will remain open for three days to close on September 22.

The offer would carry 12 crore shares for subscription and constitute up to 12% of SBI Life’s post-offer paid-up equity share capital. Though the company offers no discount to the retail individual investors, there will be a discount of Rs. 68 a share for the employees of the company. Moreover, around 1.40 crore shares have been reserved for the SBI shareholders and the employees of the company.

Here are some of the salient features of this issue:

Size & Objective of the Issue – SBI and BNP Paribas Cardif S.A. are collectively selling their 12% stake in SBI Life in this IPO to raise Rs. 8,400 crore. SBI Life will not get any proceeds from this offering.

Price Band – SBI Life has fixed its price band to be between Rs. 685-700 a share and the company has decided not to offer any discount to the retail investors.

Discount of Rs. 68 for Employees – The company has decided to offer a discount of Rs. 68 a share to its employees, which is approximately 10% to the issue price.

No Discount for Retail Investors – The company has decided not to offer any discount to the retail investors.

Retail Allocation – 35% of the issue has been reserved for the retail individual investors (RIIs), 15% for the non-institutional investors (NIIs) and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

Reservation for SBI Shareholders & SBI Life Employees – SBI Life has reserved 1.20 crore shares for the existing shareholders of its parent company, State Bank of India (SBI), and 20 lakh shares for the employees of SBI Life.

Multiple Bids by Employees & SBI Shareholders Allowed up to Rs. 2 lakh – SBI Life employees and SBI shareholders placing their bids up to Rs. 2 lakh can place their bids in the retail individual investors (RII) category as well. Technically these seem to be multiple bids, but it is allowed to place multiples bids in such a manner.

However, you need to be careful that your bid amount in each of the categories does not cross the limit of Rs. 2 lakh. If your bid amount as an SBI Life employee or as an SBI shareholder crosses Rs. 2 lakh and you place one more bid as a retail investor as well, in that case your multiple bids are liable to get rejected.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 21 shares and in multiples of 21 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,700 at the upper end of the price band and Rs. 14,385 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 21 shares each @ Rs. 700 a share i.e. a maximum investment of Rs. 1,91,100. At Rs. 685 per share also, you can apply only for 13 lots of 21 shares, thus making it Rs. 1,87,005.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on September 22nd. Its shares are expected to get listed on October 3rd.

Here are some other important dates as the issue gets closed on September 22:

Finalisation of Basis of Allotment – On or about September 27, 2017

Initiation of Refunds – On or about September 28, 2017

Credit of equity shares to investors’ demat accounts – On or about September 29, 2017

Commencement of Trading on the NSE/BSE – On or about October 3, 2017

Peer Comparison

SBI Life Insurance IPO Review – Should You Invest or Not @ Rs. 685-700?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

ICICI Lombard General Insurance IPO Details

Anchor Investment

ICICI Lombard has sold 24,580,447 shares to the anchor investors @ Rs. 661 a share, which makes their investment to be Rs. 1,625 crore as the issue gets opened for subscription today. These anchor investors include Nomura India Stock Mother Fund, Amansa Holdings Private Limited, Franklin Templeton Investment Funds, DSP Blackrock, Abu Dhabi Investment Authority, Birla Sun Life Trustee Company, SBI Mutual Fund, Kotak Mutual Fund, L&T Mutual Fund and Reliance Top 200 Fund, among others.

Peer Comparison

(Note: Figures are in Rs. Crore, except per share data, figures in millions/billions & percentage figures)

ICICI Lombard is the largest private sector non-life insurance company in India with a market share of 18% among private insurers, and 8.4% market share across all non-life insurance companies. The company issued around 1.77 crore policies in FY17 amounting to Rs. 10,725 crore in Gross Direct Premium Income (GDPI). During FY17, it settled 94.4% of its claims within 1 month of their filing, which is the fastest among all non-life insurance companies.

The company has around Rs. 150.8 billion in investment assets, out of which 14.7% is equity investments, both of which are highest among all of the non-life private insurance companies. As the “Combined Ratio” of ICICI Lombard is more than 100%, the company earns its profits by making these equity and debt investments. In a falling interest rate environment and bullish stock markets scenario, it is working well in favour of the company.

Loss Ratio – Loss ratio is the ratio of the claims incurred, net to the Net Earned Premium (NEP).

Net Expense Ratio – Net expense ratio is the ratio of the sum of operating expenses related to insurance business and commission paid (net) to the NWP. The net expense ratio is a measure of an insurance company’s operational efficiency.

Combined Ratio – Combined ratio is the sum of loss ratio and net expense ratio. The combined ratio is a measure of the profitability of an insurance company’s underwriting business. A ratio below 100% usually indicates that the insurance company generates a margin in its insurance operations, while a ratio above 100% usually indicates that insurance company is paying out more money in claims and operating expenses than it is receiving from premiums.

Financials of ICICI Lombard General Insurance Company Limited

(Note: Figures are in Rs. Crore, except per share data & percentage figures)

ICICI Lombard reported Rs. 641.82 in profits, Rs. 14.25 a share as diluted EPS and Rs. 82.57 as book value per share during the previous financial year i.e. FY 2016-17. At Rs. 661 being the likely issue price, the company is valued at 46.38 times its 12-month trailing EPS and 8 times its book value as on March 31, 2017. I think these are stretched valuations by any standards and makes me extremely uncomfortable to put my money in this IPO.

What disturbs me more than anything else is the steep premium the company is seeking in this IPO as compared to the transaction carried out in May 2017 with the selling shareholder being the same. Fairfax sold its 12.18% stake in ICICI Lombard in May 2017 for Rs. 2,473 crore, which valued it at Rs. 450 a share. Now, in less than 4 months’ time, what fundamental changes have been carried out in the company to seek a 47% premium from the common investors?

I think it is highly unreasonable to seek such a steep premium in such a short period of time and probably the biggest reason for me to avoid this unreasonably expensive issue. Exuberance might help ICICI Lombard to have some listing gains, but then there is no way this investment could be a multibagger for its investors. I would advise my clients to avoid this issue at these valuations.

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

ICICI Lombard General Insurance IPO Review – Should You Invest or Not @ Rs. 651-661?

ICICI Group’s general insurance arm, ICICI Lombard General Insurance Company Limited, is all set to enter the primary markets through its initial public offer (IPO) of Rs. 5,700 crore from tomorrow, September 15. The IPO is an offer for sale (OFS) by ICICI Lombard’s promoter, ICICI Bank and its existing shareholder, FAL Corporation. The company has fixed its price band in the range of Rs. 651-661 a share. Subscription to the issue will remain open for three days to close on September 19.

The offer would carry around 8.62 crore shares for subscription and constitute 19% of ICICI Lombard’s post-offer paid-up equity share capital. No discount is offered to the retail investors and employees of the company, however around 43 lakh shares will be reserved for the ICICI Bank shareholders.

Here are some of the salient features of this issue:

Price Band – ICICI Lombard has fixed its price band to be between Rs. 651-661 a share and the company has decided not to offer any discount to the retail investors and/or its employees.

Size & Objective of the Issue – ICICI Bank and FAL Corporation are collectively selling their 19% stake in ICICI Lombard in this offer to raise Rs. 5,700 crore. ICICI Lombard will not get any proceeds from the IPO.

Retail Allocation – While retail individual investors (RIIs) will get 35% reservation in the IPO, 15% of the issue will remain reserved for the non-institutional investors (NIIs) and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

Reservation for ICICI Bank Shareholders – Around 43 lakh shares have been reserved for the ICICI Bank’s existing shareholders, which is 5% of the total issue size.

No Discount for Retail Investors & Employees – The company has decided not to offer any discount to the retail investors and its employees.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 22 shares and in multiples of 22 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,542 at the upper end of the price band and Rs. 14,322 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 22 shares each @ Rs. 661 a share i.e. a maximum investment of Rs. 1,89,046. At Rs. 651 per share also, you can apply only for 13 lots of 22 shares, thus making it Rs. 1,86,186.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on September 19th. Its shares are expected to get listed on September 27th.

Anchor Investment – ICICI Lombard has sold 24,580,447 shares to the anchor investors @ Rs. 661 a share, which makes their investment to be Rs. 1,625 crore as the issue gets opened for subscription today. These anchor investors include Nomura India Stock Mother Fund, Amansa Holdings Private Limited, Franklin Templeton Investment Funds, DSP Blackrock, Abu Dhabi Investment Authority, Birla Sun Life Trustee Company, SBI Mutual Fund, Kotak Mutual Fund, L&T Mutual Fund and Reliance Top 200 Fund, among others.

Here are some other important dates as the issue gets closed on September 19:

Finalisation of Basis of Allotment – On or about September 22, 2017

Initiation of Refunds – On or about September 25, 2017

Credit of equity shares to investors’ demat accounts – On or about September 26, 2017

Commencement of Trading on the NSE/BSE – On or about September 27, 2017

Peer Comparison

(Note: Figures are in Rs. Crore, except per share data, figures in millions/billions & percentage figures)

ICICI Lombard is the largest private sector non-life insurance company in India with a market share of 18% among private insurers, and 8.4% market share across all non-life insurance companies. The company issued around 1.77 crore policies in FY17 amounting to Rs. 10,725 crore in Gross Direct Premium Income (GDPI). During FY17, it settled 94.4% of its claims within 1 month of their filing, which is the fastest among all non-life insurance companies.

The company has around Rs. 150.8 billion in investment assets, out of which 14.7% is equity investments, both of which are highest among all of the non-life private insurance companies. As the “Combined Ratio” of ICICI Lombard is more than 100%, the company earns its profits by making these equity and debt investments. In a falling interest rate environment and bullish stock markets scenario, it is working well in favour of the company.

Loss Ratio – Loss ratio is the ratio of the claims incurred, net to the Net Earned Premium (NEP).

Net Expense Ratio – Net expense ratio is the ratio of the sum of operating expenses related to insurance business and commission paid (net) to the NWP. The net expense ratio is a measure of an insurance company’s operational efficiency.

Combined Ratio – Combined ratio is the sum of loss ratio and net expense ratio. The combined ratio is a measure of the profitability of an insurance company’s underwriting business. A ratio below 100% usually indicates that the insurance company generates a margin in its insurance operations, while a ratio above 100% usually indicates that insurance company is paying out more money in claims and operating expenses than it is receiving from premiums.

Financials of ICICI Lombard General Insurance Company Limited

(Note: Figures are in Rs. Crore, except per share data & percentage figures)

ICICI Lombard reported Rs. 641.82 in profits, Rs. 14.25 a share as diluted EPS and Rs. 82.57 as book value per share during the previous financial year i.e. FY 2016-17. At Rs. 661 being the likely issue price, the company is valued at 46.38 times its 12-month trailing EPS and 8 times its book value as on March 31, 2017. I think these are stretched valuations by any standards and makes me extremely uncomfortable to put my money in this IPO.

What disturbs me more than anything else is the steep premium the company is seeking in this IPO as compared to the transaction carried out in May 2017 with the selling shareholder being the same. Fairfax sold its 12.18% stake in ICICI Lombard in May 2017 for Rs. 2,473 crore, which valued it at Rs. 450 a share. Now, in less than 4 months’ time, what fundamental changes have been carried out in the company to seek a 47% premium from the common investors?

I think it is highly unreasonable to seek such a steep premium in such a short period of time and probably the biggest reason for me to avoid this unreasonably expensive issue. Exuberance might help ICICI Lombard to have some listing gains, but then there is no way this investment could be a multibagger for its investors. I would advise my clients to avoid this issue at these valuations.

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Infrastructure development company, Capacite Infraprojects Limited, is launching its initial public offer (IPO) of Rs. 400 crore in the price band of Rs. 245-250 a share. Subscription to the issue is starting today and will remain open for three days to close on September 15.

Here are some of the salient features of this issue:

Price Band – Capacite Infra has fixed its price band to be between Rs. 245-250 per share and the company has decided not to offer any discount to the retail investors and/or its employees.

Size & Objective of the Issue – Capacite Infra is targeting to raise Rs. 400 crore from this IPO, out of which the company plans to use Rs. 250 crore for funding its working capital requirements, Rs. 51.95 crore for funding its purchase of capital assets and the remaining Rs. 98.05 crore for general corporate purposes.

Retail Allocation – 35% of the issue size is reserved for the retail individual investors (RIIs), 15% is reserved for the non-institutional investors and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

No Discount for Retail Investors & Employees – The company has decided not to offer any discount to the retail investors and its employees.

Anchor Investors – The company has sold 48 lakh shares to the anchor investors @ Rs. 250 a share, which makes their investment to be Rs. 120 crore. These anchor investors include Goldman Sachs India, HSBC Global Investment Funds – Indian Equity, HDFC Trustee Company, Birla Sun Life Trustee Company, Reliance Capital Trustee Company and DSP BlackRock India T.I.G.E.R. Fund, among others.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 60 shares and in multiples of 60 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 15,000 at the upper end of the price band and Rs. 14,700 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 60 shares each @ Rs. 250 i.e. a maximum investment of Rs. 1,95,000. At Rs. 245 per share as well, you can apply only for 13 lots of 60 shares, thus making it Rs. 1,91,100.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on September 15th. Its shares are expected to get listed on September 21st.

Here are some other important dates after the issue gets closed on September 15:

Finalisation of Basis of Allotment – On or about September 21, 2017

Initiation of Refunds – On or about September 22, 2017

Credit of equity shares to investors’ demat accounts – On or about September 22, 2017

Commencement of Trading on the NSE/BSE – On or about September 25, 2017

Financials of Capacite Infraprojects Limited

(Note: Figures are in Rs. Crore, except per share data & percentage figures)

Should you invest in Capacite Infraprojects at Rs. 245-250 a share?

Incorporated in August 2012, Capacit’e Infra has grown itself extremely fast. Revenues of the company have grown from Rs. 216.58 crore (FY14) to Rs. 1,165.97 crore (FY17), i.e. a growth of 438% in 3 years. Its profit after tax (PAT) has grown from Rs. 3.57 crore to Rs. 69.38 crore in the same period, i.e. a growth of 1,843% in 3 years.

On a YoY basis, while its revenues jumped 36% from last year’s Rs. 860 crore, EBITDA registered a growth of 37%, from Rs. 122 crore to Rs. 167 crore, and PAT jumped 43% as compared to Rs. 48.39 crore. As on May 31, 2017, the company has a very healthy order book of Rs. 4,602 crore, comprising 56 residential, commercial and institutional projects. At Rs. 1,166 crore of revenues for FY17, the current order book of Rs. 4,602 crore itself is equivalent to 4 years of revenues, which is very encouraging.

The company has a long list of reputed clients, such as Oberoi Realty, Prestige Group, Lodha Developers, Kalpataru, Wadhwa Group, Rustomjee, Godrej Properties, Saifee Burhani Upliftment Trust and Brigade Enterprises, among others. Working for such kind of big developers and earning repeat orders from them provides a great comfort as far as company’s credentials are concerned.

At Rs. 250 a share, Capacit’e Infra is valued at 18 times its trailing 12-months diluted EPS and carries a market cap of around Rs. 1,700 crore. Though nobody expects its current growth to repeat itself in the next 3-5 years, but even if the company continues to keep a similar momentum going forward, the price of Rs. 250 a share the company is seeking seems extremely attractive for listing gains, as well as for medium to long term wealth creation. I would put this one in the same basket as Dmart was and hope this one too generates similar kind of returns for its successful allottees.

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Matrimony.com Limited is all set to enter the primary markets with its initial public offer (IPO) of Rs. 497 crore. The IPO is a combination of fresh issue of equity shares worth Rs. 130 crore and an offer for sale (OFS) of 37.67 lakh shares in a price band of Rs. 983-985 a share. Subscription to the issue started yesterday and will remain open for two more days to close on September 13.

In order to attract retail participation, the company has decided to offer a really big discount of Rs. 98 a share. However, the retail investor will have access to only 10% of the issue size.

Before we analyse it further, let us first check the salient features of the issue:

Price Band – Matrimony.com has fixed its price band to be between Rs. 983-985 per share and the company has decided to offer a discount of Rs. 98 a share to the retail investors and its own employees.

Size & Objective of the Issue – As mentioned above, Matrimony.com is targeting to raise Rs. 497 crore from this IPO. Out of this Rs. 497 crore, Rs. 367 crore will go to some of its existing investors and with the remaining Rs. 130 crore, the company plans to use Rs. 42.58 crore for the purchase of land in Chennai to construct its office premises, Rs. 43.34 crore for repayment of its existing overdraft facilities, Rs. 20 crore towards advertising and business promotion activities and the remaining amount for general corporate purposes.

Retail Allocation – 10% of the issue size is reserved for the retail individual investors (RIIs), 15% is reserved for the non-institutional investors and the remaining 75% shares will be allocated to the qualified institutional buyers (QIBs).

Rs. 98 a share Discount for Retail Investors & Employees – Matrimony.com has decided to offer a discount of Rs. 98 to the retail investors and its employees, which is about 10% of the issue price.

Anchor Investors – The company has already sold approximately 22.93 lakh shares to the anchor investors @ Rs. 985 a share, which makes their investment to be Rs. 225.89 crore. These anchor investors include Smallcap World Fund, HDFC Prudence Fund, Goldman Sachs India, ICG Q Limited and HDFC Growth Fund, among others.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 15 shares and in multiples of 15 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,775 at the upper end of the price band and Rs. 14,745 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 15 lots of 15 shares each @ Rs. 887 i.e. a maximum investment of Rs. 1,99,575. At Rs. 885 per share as well, you can apply only for 15 lots of 15 shares, thus making it Rs. 1,99,125.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on September 13th. Its shares are expected to get listed on September 21st.

Here are some other important dates after the issue gets closed on September 13:

Finalisation of Basis of Allotment – On or about September 19, 2017

Initiation of Refunds – On or about September 20, 2017

Credit of equity shares to investors’ demat accounts – On or about September 20, 2017

Commencement of Trading on the NSE/BSE – On or about September 21, 2017

Financials of Matrimony.com Limited

(Note: Figures are in Rs. Crore, except per share data & percentage figures)

Should you invest in Matrimony.com at Rs. 983-985 a share?

At Rs. 985 a share, the company is valued at 48 times its FY17 earnings and around 36 times its EV/EBITDA. Based on its quarter-ended June 2017 financial performance, the company is valued at 32 times its annualised earnings and 25 times its expected EV/EBITDA. But, fundamentally speaking, the company carries a volatile history of earnings growth despite having steady growth in revenues and we just cannot bank on its recent turnaround in financial performance to justify its steep IPO pricing. The company reported a net loss in the four out of last five financial years and still carries a negative net worth to the tune of Rs. 16 crore.

This IPO is a combination of fresh issue of shares worth Rs. 130 crores and offer for sale by its existing investors to the tune of 367 crore. The company will use its Rs. 130 crore for the repayment of its overdraft facilities (Rs. 43.34 crore), purchase of land in Chennai for constructing an office premises for its own use (Rs. 42.58 crore) and advertising and business promotion activities (Rs. 20 crore). All these factors do not fully justify the need of raising money through an IPO route and it seems that the existing investors want to book some of their profits in this existing overheated IPO market.

Moreover, it is difficult for me to understand the reasons for which the company is giving such a big discount of Rs. 98 a share to the retail investors. As long as I remember, no company in the past few years has done so and it smells fishy to me to get such a steep discount.

Although, current market sentiment might give it an extraordinary listing pop, but long term investors would do well to analyse its financial performance for at least 2-3 more quarters before taking any investment call. Personally, I would avoid this IPO at this juncture and will relook at it once its financial performance shows some kind of consistent improvement.