Housing Development Finance Corporation Ltd (HDFC) – India’s largest mortgage lender – will dilute 10% of its stake in its insurance venture with UK’s Standard Life Plc, paving the way for the country’s first life-insurance listing, according to The Economic Times.
In a regulatory filing dated April 19, HDFC said the board of directors of its non-listed subsidiary – HDFC Standard Life Insurance Company Limited (HDFC Standard Life) – has approved taking steps to initiate the process for an initial public offering (IPO), which will see HDFC diluting 10% of its 61.65% stake in the insurance arm.
Currently pending various regulatory approvals – including from the Insurance Regulatory and Development Authority and the Securities and Exchange Board of India – industry experts value the deal at 20 billion Indian rupees (US$299.67 million), based on valuations derived from earlier off-market stake sale transactions by the private insurer.
HDFC recently completed the sale of its additional 9% stake in HDFC Standard Life to Edinburgh-based Standard Life, which saw its stake in the venture increasing from 26% to 35%. Standard Life paid 17.05 billion Indian rupees to HDFC, which valued the unit at 185 billion Indian rupees.
The IPO will be the first from an insurer to be on the Indian market since the government first allowed private participation in 2000, with a limit of 26% on foreign direct investment. The limit was subsequently raised to 49% in March last year, after the Indian parliament ratified the previously-stalled Insurance Laws (Amendment) Bill in order to facilitate growth and encourage consolidation within the industry.
The listing of HDFC Standard Life is clearly not the last, with up to seven other companies looking at potentially listing their insurance units over the next few years, reported Bloomberg. The State Bank of India and the ICICI (Industrial Credit and Investment Corporation of India) Bank Ltd had earlier announced the intention to list their respective insurance arms.
The life-insurance industry in the world’s second most-populated country is estimated to be worth $50 billion, while general insurance is valued at about $13 billion, according to KPMG. Insurance penetration remains lower than the global average, with premiums underwritten as a proportion of the country’s total economic output standing at 3.9% in 2013, which is less than the 6.3% worldwide average.
Following the easing of foreign-ownership rules in India, foreign insurers who have raised stakes in their Indian ventures include HSBC Insurance Holdings Ltd, which announced that it increased holdings in its venture with Canara Bank, and Bupa Plc, which increased its holdings in Max Bupa Health Insurance Co.
In 2015, ICICI Bank Ltd sold a 6% stake in its life insurance venture – ICICI Prudential Life Insurance Co – to the family office of billionaire Azim Premji and a subsidiary of Singapore’s Temasek Holdings Pte Ltd. It also sold a 9% stake in its general insurance unit to Toronto-based Fairfax Financial Holdings Ltd.
