Mumbai: Canara HSBC Life Insurance Files Draft IPO Papers
Canara HSBC Life Insurance has filed draft papers with the capital markets regulator for an initial public offering (IPO) that could value the insurer at around 16,500 crore, based on its latest embedded value of 5,929 crore and assuming a price-to-embedded value (P/EV) multiple of 2.75x.
The share sale will be entirely an offer for sale of up to 237.5 million shares, with state-run Canara Bank proposing to divest up to 137.75 million shares. HSBC Insurance (Asia-Pacific) Holdings will offer up to 4.75 million shares, and Punjab National Bank will sell 95 million shares, according to the draft red herring prospectus filed with the Securities and Exchange Board of India.
While the company has not yet provided an official valuation estimate, the 16,500 crore figure is based on the valuation benchmarks of listed life insurers. This stake sale could fetch around 2,200 crore for the 14% stake on sale.
Separately, Canara Bank is expected to raise around 500 crore by selling a 13% stake in its mutual fund subsidiary, Canara Robeco Asset Management, through an IPO, which will help the lender in boosting its capital adequacy and loan book.
The IPO is a key part of Canara Bank’s strategy to unlock value from its insurance joint venture, and comes at a time when valuation multiples across the life insurance sector have compressed. All listed players have seen a contraction in P/EV multiples over the last 3-4 years. HDFC Life has seen its multiple fall from around 4x to now 2.76x. Founded in 2007, Canara HSBC Life’s AUM stood at 40,012 crore while its annualised premium equivalent (APE) reached 1,714 crore as of December 2024. The insurer reported a profit after tax of 113 crore in FY24. For the nine months ended December 2024, it posted a PAT of 84.9 crore. Operating return on embedded value stood at 20.4%, with a value of new business (VNB) margin of 17.6% and VNB of 302 crore. Product mix has shifted significantly, with unit-linked insurance plans accounting for 61.1% of the portfolio by December, up from 36.6% in March. Non-participating savings products declined to 17.5% from 33.4% over the same period.
Reference : https://economictimes.indiatimes.com/markets/ipos/fpos/canara-hsbc-life-insurance-plans-rs-16500-crore-ipo-amidst-valuation-challenges/articleshow/120746965.cms
