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ICICI Pru Life increases its market share by 410 basis points

Disclaimer:I am market making in the shares of ICICI Pru Life

The stock market boom has breathed new life into a few large life insurance companies, thanks mainly to unit-linked insurance plans (Ulips).

Top private life insurers like ICICI Prudential Life, HDFC Life Insurance, Max Life Insurance and a couple of smaller players with a significant number of Ulips in their product baskets have been able to register double-digit growth in individual new business premium during April-August.

On the other hand, PSU behemoth Life Insurance Corporation of India (LIC) has witnessed negative growth in individual business for the same period. According to data available with Financial Chronicle, individual adjusted first-year premium calculated (as per international norms) by taking into account 10 per cent of single premium and 100 per cent of regular premium during April-August was Rs 1,347 crore for ICICI Prudential Life Insurance, up 34 per cent.

During this period, ICICI Prudential Life’s market share increased by 410 basis points. One basis point is one-100th of a per cent. More than 70 per cent of ICICI Prudential Life’s premium comes from Ulips and the rest from traditional products.

Similarly, HDFC Life Insurance had individual new business premium of Rs 855 crore during April-August, a growth of 31 per cent, which improved its market share by 228 basis points to 15.1 per cent. Max Life Insurance clocked a 15 per cent growth in individual first-year premium at Rs 614 crore during this period.

A top official with a large life insurance company said, “A bull run is supporting higher Ulip sales, which could be one reason. The other reason is that people are moving away from gold to financial products. Financial savings ratio as a percentage to GDP has now started to increase. But we need to wait, as these are early days as 60-70 per cent of actual sales of the life insurance industry happen in the second half of FY15.”-from MyDigital

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Why investors are still bullish on India

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Linkfest: September 24,2014

Some stuff I am reading today morning:

Did Alibaba’s IPO signal a top in the stock market? (Market Watch)

NSE to get listed at ‘Most Opportune Time’ (MoneyControl)

The Royalties factor (BL)

HNIs buy Nifty linked debentures worth 200-300 Crores every month (ET)

Why are insurance companies selling in this market (Mint)

On Stock Buybacks (Aswath Damodaran)

Why hedge with a hedge fund? (Barry)

How to double your money in 5 hours (Daily Reckoning)

Tech stocks can be great for value investors (MillenialInvest)

Wall Street’s love affair with Russia is ending (Dealbook)

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Two rules for investing

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Ratnakar Bank hires four banks for Rs. 1,200 Crore IPO

Hat Tip: Shivam Bose

 

(Disclosure:I am market making in the shares of Ratnakar Bank)
Ratnakar Bank Ltd (RBL) has appointed four investment banks for its Rs.1,200 crore initial public offer (IPO), which is expected to hit the market before March 2015, three people close to the development said. The bank is expected to file its documents with the market regulator as early as October.

The bank has mandated Kotak Mahindra Capital Co. Ltd, Citigroup Inc., Standard Chartered Plc and Morgan Stanley to handle the issue. Mint had reported on 1 July that the private sector lender plans to dilute about 10% stake through the IPO, which values the bank at Rs.12,000 crore.

 

Though RBL has no immediate requirement for fresh capital, the IPO would help the bank comply with the Reserve Bank of India (RBI) guidelines issued last year that directed all banks to list within three years of starting business.
Over the last three years, global and local private equity and development funds have invested over Rs.1,400 crore in the bank in three tranches. Housing Development Finance Corp. Ltd, Norwest Venture Partners, Samara Capital, Beacon Capital, Faering Capital, TVS Shriram, Cartica Capital, Ascent Capital, Aditya Birla Private Equity, IDFC’s Spice Fund and ICICI’s Emerging India Fund are among its shareholders.
Most investors, however, may continue to stay invested, the person quoted above said. “It is unlikely that any of the existing investors will sell their investments in the bank because none of them have stayed invested for more than three-and-a-half years. Some of the bank’s shareholders are development finance institutions, which typically hold their investments for many years,” he said.

The share sale, if it materialises, will make RBL the 41st publicly traded bank in India. The IPO comes at a time when secondary markets are buoyant and interest in primary markets is starting to pick up.

 

Vinod Wadhwani, director at Ambit Corporate Finance Pte Ltd, expects a robust investor response to the IPO. “Given that most of the public sector banks are reeling under the huge pressure of non-performing loans, investor interest in public sector banks is limited. There is a dearth of new and quality paper supply in the private sector as well. Private sector banks such as Ratnakar Bank, which has a competitive management team in place, is expected to continue its growth trajectory. Hence, the investor response to the IPO is expected to be robust,” Wadhwani said.

 

In an interview with Mint in June, Rajeev Ahuja, head of strategy at the bank, had said that no single investor holds more than 5% in RBL. An IPO will hence mean a further reduction in stakes of existing investors. Besides, it will also give liquidity to employees for their stock options and probably attract more large investors who would want to buy into a listed bank.
As on 31 March, the bank had a loan book of Rs.9,835 crore, according to RBL’s website. In fiscal year 2014, it added 51 branches and a similar number will be added in the current fiscal year, Ahuja had said. As on March 2014, RBL had 185 branches and 350 ATMs with more than 500,000 clients.
Overall, the bank is targeting growth of 40-50% in advances and deposits over the next couple of years, Ahuja said. For the year ended March 2014 the bank’s net advances grew 54% while deposits rose 39%.
from Mint