The New India Assurance Company Ltd. (NIA) is the largest general insurance company in India in terms of Net Worth, Domestic gross direct premium, profit after tax and number of branches for the FY17. In FY17, it had the highest market share of gross direct premium among general insurers in India. NIA’s gross direct premium from fire, engineering, aviation, liability, marine, motor and health insurance represented a market share of 19.1%, 21.9%, 29.6%, 18.2%, 21.0%, 15.1% and 18.4% respectively, of total gross direct premium in these segments in India in FY17.
Objects Of The Issue :
Out of the entire issue of 120mn shares, 96mn is offer for sale by the Govt. and the balance 24mn shares amounting to `19.2bn is proposed to be utilized towards meeting future capital requirements which are expected to arise from the growth and expansion of the business, improving solvency margin and consequently the solvency ratio.
Valuation And Investment Argument
NIA is the largest general insurance company in India in terms of Net Worth, Domestic gross direct premium, profit after tax and number of branches. It has also maintained a market share greater than 15% over the last 5 years. NIA has been reporting an operating loss in the past 2 years due to higher outgo on account of wage revision and claims in health segments. However, NIA posted an operating profit of `1783mn and PAT of `5134mn in Q1FY18 (up by 144% on an annualized basis) on the back of better product mix and revision in health premiums. At the price band of `770-800 the asking valuations for the issue are ~75-78x its FY17 EPS of `10.2& ~1.8x P/BV for FY17. As a macro space we believe insurance sector can witness high growth as awareness of risk cover as well as shift of savings to financial assets accelerates over the next decade. Being a leader in the space & having superior operating metrics we believe the company is well poised to take up the opportunity of increase in penetration over the next few years. We advice investors with a long-term investment horizon to SUBSCRIBE to the issue.
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