SBI Life Insurance Co. Ltd may float its initial public offering (IPO) in 2017.
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On 2 December 2016, the sale of 3.9% stake by the insurer’s parent, State Bank of India (SBI), to KKR and Temasek Holdings at Rs 460 a share valued the business of SBI Life Insurance at Rs 46,000 crore, a shade lower than ICICI Prudential Life Insurance Co. Ltd (valued at Rs 47,957 crore through the initial public offering in September). SBI Life Insurance Co. Ltd holds a little over 9% market share.
The embedded value for SBI Life Insurance is Rs 13,000 crore for 2016-17 as disclosed by the insurer. The deal values the company at 3.5 times its embedded value of 2016-17, which looks cheap in comparison to ICICI Prudential Life Insurance being valued at a multiple of 3.45 and HDFC-Max Life at 4.3. According to Nomura Securities, SBI Life’s valuation is 2.47 times its estimated earnings for 2017-18, cheaper than both ICICI Prudential Life and the combined HDFC-Max Life Insurance.
SBI, which holds 74% in SBI Life, has also offered to offload 10% to the other partner, BNP Paribas Cardiff, at a right price.
The life insurance unit of the country’s largest lender SBI showed an impressive 77% growth in its new business premium to Rs 4,644 crore, driven by the 54% growth in the most coveted segment of individual new business premium. The insurer posted a 6% rise in its net profit to Rs 428 crore for the six-month period ended September despite such a scorching pace of growth. Insurance is a sector wherein high growth tends to bleed the business entity.