General Insurance Corporation of India Ltd.

Transcription

1 General Insurance Corporation of India Ltd. Reco: Subscribe 10 th October, 2017 Fresh Issue of 1.72 Crore Equity Shares & Offer For Sale of Crore Equity Shares of FV Rs 5/- each (Rs. 11,372 Crs) Price band of Rs Rs. 912 per share (A discount of Rs. 45 is offered to Retail Individual Bidders) Issue Opens: 11 th Oct 2017 Issue Closes: 13 th Oct 2017 General Insurance Corporation of India Ltd. ( GIC ) is a market leader in the Reinsurance business with a market share of 60% and a trusted brand with 44 years of experience. GIC is the largest reinsurance company in India in terms of gross premium accepted in FY17 (Rs. 33,741 Crs). According to CRISIL Research, GIC is ranked as 12 th largest global reinsurer in 2016 and 3 rd largest Asian reinsurer in GIC writes reinsurance for every non-life and more than half of the life insurance companies in India across most business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit, financial and life insurance. The Company has a global presence with branch offices in London, Dubai and Kuala Lumpur, a representative office in Moscow, a subsidiary in the United Kingdom that is a member of Lloyd s of London and a subsidiary in South Africa. The competitive advantages of GIC in the domestic reinsurance market are the following: Experienced underwriting and actuarial team; Strong customer service focus including the settlement of claims quickly and professionally; Strong balance sheet which allows it to underwrite risks across the Indian insurance market including large policies covering industrial and large infrastructure projects; Underwriting and actuarial capabilities that it uses to evaluate and accept domestic business. Glance at Financial Performance of GIC: INR Crores ( Crs ) Q1FY18 FY17 FY16 Y-o-Y Equity Share Capital (FV: Rs.5) Net worth 52,660 50,006 41,875 19% Gross direct premium 17,325 33,741 18,534 82% Net Premium 12,923 26,375 15,338 72% Total Income 673 3,799 3,269 16% Operating Profit 318 2,142 1,590 35% PBT 558 3,417 3,021 13% PAT 629 3,141 2,823 11% EPS* % Book Value % Operating Expense Ratio 0.33% 0.83% 1.15% - Combined Ratio 98.43% % % - Return on Net worth - 16% 16% - *EPS for Q1FY18 is not annualised.

2 Critical Analysis: In FY17, GIC achieved a stupendous growth of 82% in gross direct premium of Rs. 33,741 Crs (Rs. 18,534 Crs in FY16), total income grew by 16% to Rs. 3,799 Crs (Rs. 3,269 Crs in FY16). GIC s improving top line has been further complimented with a strong bottom line growth of 11% to Rs. 3,141 Crs in FY17 (Rs. 2,823 Crs in FY16). The operational efficiency of GIC improved with a growth in operating profit of 35% to Rs. 2,142 Crs in FY17 (Rs. 1,590 Crs in FY16) on the back of reduction in operating expense ratio to 0.83% in FY17 (1.15% in FY16). The Company s Networth increased by 19% to 50,006 Crs. in FY17 posting a robust return of 16% on Networth. Valuation: GIC s gross direct premium has grown at a whopping CAGR of 49% in last 3 years to Rs. 33,741 Crs in FY17 (Rs. 15,270 Crs in FY15) indicating a strong growth for reinsurance business in the Indian economy for the years ahead. GIC maintains a diversified Indian investment portfolio to generate returns to support its liabilities for the reinsurance it underwrites and to create shareholder value. The Company s capital allocation has sought for a balance between stability and yield, and it diversifies investments by the type of security, industry sector and in the case of fixed income securities -maturity. GIC s Indian investment portfolio includes fixed income debt securities, equity securities including exchange traded funds, and other investments. The introduction of Pradhan Mantri Fasal Bima Yojna ( PMFBY ), Pradhan Mantri Jeevan Jyoti Bima Yojana ( PMJJBY ) has changed the dynamics of the crop insurance and life insurance market wherein market players like LIC, SBI life insurance Ltd., ICICI Prudential Ltd., ICICI Lombard Ltd. witnessed an exponential growth in its business as the demand for insurance rose leading to an increased demand for reinsurance. The general insurance industry in India continues to have high growth potential, growing at a healthy CAGR of 15% in ten fiscal years ending FY17 and reaching a premium of Rs. 38,800 Crs as on date. GIC at a higher price band of Rs. 912 per share values the reinsurance giant at a little under Rs. 80,000 Crs. The issue is priced at a PE multiple of 25 times the FY17EPS and P/BV of 1.57 times. Considering the likely increase in earnings and the net worth in the years to come, we believe the issue is very attractive for long term investors. With the increasing effort of the Government of India led by Shri Narendra Modi in bringing the unorganised sector to the organised sector and as young India works towards fulfilling its aspirations, the demand for personal and financial assets will increase and hence the need to insure the life and non-life industry will only rise, benefitting the company. The untapped opportunity and penetration in the insurance sector could prove to be favourable for the reinsurance sector and GIC being the market leader has ample scope to grow at a rapid pace. We believe GIC has the potential to post robust numbers for the FY18 and onwards.

3 GIC which will be listed on NSE and BSE appears to be attractive for the investors and offers excellent scope for growth and appreciation to the investors. We are confident that the Reinsurer will deliver consistent performance in the years to come. We recommend all investors to SUBSCRIBE. CONTACT US IMMEDIATELY FOR APPLICATION FORMS AND HNI INVESTORS CAN GET IN TOUCH WITH US TO DESIGN A PROFITABLE INVESTMENT STRATEGY IPO Subscription Details: Minimum Order Quantity Resident Retail Individual Investors Non-Retail / Non-Institutional Investor 16 Equity Shares and in multiples of 16 shares thereafter Payment through ASBA only Payment through ASBA only Contact Details: Corporate Office Address: 702, Embassy Centre, Nariman Point, Mumbai Tel.: /21, Fax: info@nvswealthmanagers.com Website: Disclosures and Disclaimers: This note has been prepared and issued by NVS Wealth Managers Pvt. Ltd. "SEBI registered Investment Advisers".

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5 Risk Description Predictability of earnings/ Dividends; Price volatility Low risk Medium risk High risk High predictability / low volatility Moderate predictability / volatility Low predictability / High volatility Total expected return matrix Rating Low Risk Medium Risk High Risk Buy Over 15% Over 20% Over 25% Accumulate 10% - 15% 15% - 20% 20% - 25% Hold 0% - 10% 0% - 15% 0% - 20% Sell Negative returns Negative returns Negative returns Neutral NA NA NA Not Rated NA NA NA Please Note: Our recommendations are for a minimum period for one year. Corporate Office Address: 702, Embassy Centre, Nariman Point, Mumbai Tel.: /12, Fax: info@nvswealthmanagers.com Website: