Way2Wealth has come out with its report on MAS Financial services IPO , The research firm has recommended to “ Subscribe ” the IPO in its research report as on October 10, 2017.
General Insurance Corporation of India (GIC) is the largest reinsurance company in India in terms of gross premium accepted in FY17, and accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during FY17, according to CRISIL Research. GIC is also an international reinsurer that underwrote business from 161 countries as at June 30, 2017. According to CRISIL Research, GIC was ranked as the 12th largest global reinsurer in 2016 and 3rd largest Asian reinsurer in 2015, in terms of gross premium accepted. GIC provides reinsurance across many key business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance. Its net premium on a restated consolidated basis has grown at a CAGR of ~39% between FY15 to FY17 and PAT during the same period grew at a CAGR of ~4%.Objects Of The Issue
Out of the entire issue of 124.7mn shares, 107.5mn shares is offer for sale from Central Govt. and balance 17.2mn shares is fresh issue, which GIC proposes to utilise towards:
augmenting its capital base to support growth of the business and to maintain current solvency levels.
general corporate purposes.Valuation And Investment Argument
GIC is India’s largest reinsurer by size and is a great proxy play on the under penetration on the insurance sector. The shift of savings from physical assets to financial assets will drive growth of financial products. We believe the insurance sector is ready to climb the mountain of growth opportunities driven by deeper penetration, increasing awareness of risk cover & higher share of wallet towards investment goals. GIC has reported healthy combined ratio in Q1 at 92% & solvency ratio of 1.83 vs. statutory requirement of 1.5. Apart from that GIC has reported healthy ROE of 16-20% over the last 3 years. Globally re-insurance companies trade in the range of 1.0-1.4x P/BV. At the price band of 855-912/- the issue commands a valuation of 1.6x its FY17 book value of 500 bn. Given the higher growth prospects vs. peers globally we believe the issue is attractively priced and advise investors with a long term investment horizon to SUBSCRIBE to the issue.
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