Much to everybody’s surprise, shares of ICICI Prudential Life Insurance got listed on the bourses at a discount on Thursday, but industry experts have urged retail investors not to jump the jump and stay invested as the long-term growth outlook remains intact.
Insurance is all about being patient, and the same logic would apply to ICICI Prudential, which promises steady returns if investors stay put on the stock.
ICICI Prudential Life Insurance got listed at Rs 329 on BSE, a 1.5 per cent discount to the offer price of Rs 334. On NSE, the stock got listed at Rs 330 apiece. The stock closed 10.8 per cent lower on the BSE at Rs 297.65.
The basic fundamental underlying the life insurance industry is all about underwriting long-term policies. It is a patient form of capital, it is a patient form of business.
So I would urge investors to have some patience. I am sure this is very early days, Debasish Purohit, BofA-ML, said in an interview with ETNow.
We cannot bring everything down to the first five minutes post listing. The company management spent the last 15 years in building this business and a good part of last 6 to 12 months has been spent educating global investors about Indian insurance industry in general. Let us give it some time, he said.
Even though valuation may look stretched compared with the stocks listed in China, the insurers in India have a much bigger exposure to the insurance sector.
Most analysts said the stock can still deliver steady returns, maybe not mulibagger returns, in the near term.
ICICI Prudential Life had Rs 1.1 lakh crore of asset under management (AÙM) at the end of Q1 of FY17, making it one of the largest fund managers in India. Of the total AUM, nearly 73 per cent is invested in unit-linked assets.
The company has consistently generated highest new business premiums (NBP) every financial year among all private sector life insurers in India since FY02 on a retail-weighted received premium (RWRP) basis.
We get so focused on India, India valuation, India opportunity that we actually do not look at global comparisons of how stories have panned out, how companies in various sectors have panned out, Sanjay Dutt, Director, Quantum Securities, said in an interview with ETNow.
Nowhere in the world, investors have made 500 times-100 times returns in insurance stocks or insurance companies. Insurance is a long-term businesses.
These stocks need to be held for very long and they eventually turn out to be profitable businesses for investors, he said.
The investment opportunity in India is large, but do not expect insurance to throw up phenomenal 10 times, 20 times or 30 times kind of returns in two-three years. I do not think so, Dutt said.
India is a very difficult market to do business, particularly in the insurance and the financial services sector, but ICICI is known for investing in innovative technology much ahead of time and that would help it build a strong customer base.
The total premium of the Indian life insurance sector grew at a CAGR of approximately 17 per cent between FY01 and FY16.
India remains an under penetrated insurance market with a life insurance penetration of 2.7 per cent in FY15 against 7.3 per cent in South Korea, 3.7 per cent in Thailand and a global average of 3.5 per cent in 2015.