After ICICI Pru, other insurance cos may opt for IPO: HDFC Life

According to the terms set for the Max Life and HDFC Life merger, Amitabh Chaudhry, Managing Director and Chief Executive Officer of HDFC Life hopes that his company will be listed in the next year.After ICICI Prudential received remarkable valuations, he is confident that other insurance companies will also follow suit. He expects SBI Life to also be listed very soon.He is very confident about the insurance industry's growth and says the sector will grow at around 15-17 percent soon. Growth has been slow in the sector as companies try to maintain margins and perform consistently.The company is hoping to get CCI, IRDA and SEBI approval for the Max Financial deal by December 2016.Max Life and HDFC Life merger cleared a big hurdle recently. It received minority shareholders' approval for payment of non-compete fee to Analjit Singh.Below is the verbatim transcript of Amitabh Chaudhry’s interview to Ekta Batra and Prashant Nair on CNBC-TV18.Prashant: ICICI Prudential is down some 6 percent, a little more than that. Surely other potential companies, which want to come to the market would not be discouraged by that first day response?A: I do want to congratulate firstly ICICI Prudential for the debut on the stock exchanges. They did this issue in a record period of time.Yes, the stock price is down. It is a long-term investment and the valuations, which they have got are pretty remarkable. So, if the stock price is down a little bit, I am sure over a period of time the share price will do well. It does bode very well for the insurance industry as you know that the regulator has been pushing their insurance players to go and get listed. There is a draft guideline out, which talks about how regulator would like to have board approved policies on every insurance company getting listed in the market place. We as part of the transaction with Max Life hope to get listed sometime next year. I am sure SBI Life will also follow because they have been talking about listing for some time. So, yes, this is a very important step. Share price is down but that is a temporary phenomenon.Prashant: What should we expect? You know the business as well as any other CEO in that space, maybe better. What should investors be prepared for as they kind of get into this new sector, lots of interest of course but what should we expect?A: If you look at even what ICICI Prudential sold part of its shareholding almost a year back and what valuation they have got now that in itself reflects the huge amount of interest in the sector. You will also see that when we announced our transaction with Max Life, how the price of Max Financial Services has moved over the last six months or so. We have also gone and met and I am sure ICICI Prudential did the same, a number of investors in Hong Kong, Singapore and US and the level of interest is high.It is driven by number of factors. First is that over the last five or six years the private sector has worked very hard to clean up its model. Now the insurance sector is quite profitable. The insurance sector has started growing. We have seen growth rate of 15-17 percent over the last two years. Even this year the growth rate has been quite good. The mis-selling in the industry is coming down. The persistency ratios are up. And most of the guidelines in terms of regulatory perspective which will impact the sector are out or on their way and there is kind of clear view which insurance industry players and the regulator has in terms of what we can expect on the regulatory side too.So, if you look at all these factors the fact that the operating models are now quite clean, they are profitable. The sector is growing, mis-selling is coming down, the persistency ratios are up, the growth is back, the regulatory risk is reduced. Yes, it is a great time to invest in the sector for the lon-term. Ultimately insurance product is a long-term product. People who are investing in the insurance industry should also look at a long term outlook and invest in the sector for a long term and based on all the meetings at least we have had with investors and the interest we see, we believe that there is a real play for at least 3-4 large players to come and list in the market and do quite well.The way ICICI Prudential -- how quickly they have got this issue out and the kind of demand they got from the market is also reflective of that.For full interview, watch accompanying video...