We will look at acquisition opportunities if pricing is right: HDFC Life MD & CEO

Private life insurance company HDFC Life will be coming up with its Rs 8695 crore initial public offering (IPO) next week. In an interview with M Saraswathy of Moneycontrol, Amitabh Chaudhry, MD & CEO, HDFC Life talks about the listing and future business prospects. Edited excerpts:

Unlike the recent public issues by insurance companies, your IPO pricing was quite a suprise. What was the rationale?

We are a part of the HDFC Group and as a group we believe that every investor including new investors need to make money. It is very important that we go to the same investors to raise money in the future if any such opportunities come along. These investors should get a decent return on the money they are putting in. We know that the market was expecting something different and the bankers recommended a higher price as well.

How has the response from institutional investors been?

As far as institutional roadshows go, the response has been very good. As per our interactions, our IPO was being awaited for a long time by these institutions. We are delayed and we are hoping that some of them who haven't invested in the other insurance IPOs make their presence visible in ours.

Since the IPO proceeds will go to the promoters (HDFC and Standard Life), is there a need for capital?

Our solvency has been always above the regulatory requirement of 150 percent. We have not raised any capital and has been between 180-200 percent for the past five years consistently. Our dividend payout rate has also moved up and we believe that unless something comes along that needs huge capital, what is the need to keep ramping up the solvency. Only if we go out and make an acquisition will we need additional capital.

You also want to enter reinsurance. At what stage is this strategy?

We want to evaluate the reinsurance strategy seriously and that will take a couple of quarters to get it done. We might need capital for that and are looking at what route to take and how to go about the process.

Are you looking for acquisition opportunities?

There are more competitors than what are needed in the insurance space. We are always in the lookout for good acquisition opportunities. At some stage, some shareholders will be under pressure to sell since some insurers have had sub-optimal performance. If we get them at the right price, we will evaluate them.

Is there any impact on your business after the group company HDFC Bank opened up their branches to other insurers?

Not as yet. Business has not been impacted. But since they are also tied up with two other insurers, they will take away some share. But it is too large a bank and impact on us is quite minimal. We already have 125 banks as bancassurance partners.

How has your subsidiary HDFC Pension performed?

While the private sector fund managers do not have access to the government funds as yet and it is a restriction, this subsidiary has performed well. HDFC Pension gets almost 50 percent of the corporate NPS (National Pension Scheme) subscribers and has been increasing our market share. The company is at the second position on the private side and if the flows continue as they are, it should be number one on the private side by the end of this year.

This is despite us being a late entrant by four years and had a case going in Supreme Court which we won. It is still early days and there is huge opportunity. It also feeds well into the annuity business of the insurance company and are building it up slowly.