The offer for sale by HDFC Life in which the promoter company Standard Life is offering shares of the insurance company at Rs. 390 per share will open in the 2-day offer for sale on Monday for retail investors.
For the retail investors, 10% of the portion is fixed and such investors can place their bids at a cut off price or the lowest price at which the shares are being sold as part of the offer. Allocation of shares to these participants will be on the basis of a price priority method at several clearing prices.
Issue details: For retail investors, the offer for sale of HDFC Life offering 3.6 million shares will open on Monday. The institutional investor places their bids 3 times higher than the offered size at indeed a higher price than the issue price of Rs. 406 per share.
The objective of the OFS: Through the offer for sale, Standard Life will pare its stake in the insurance company by 1.78%, at present the company holds a 24.66% stake and HDFC, the mortgage lender owns 51.48% stake in the company.
Past performance and potential performance of HDFC Life: In the last 3 years, the stock has managed to deliver a return of 25% on an average basis and since its listing 32%. And though, the stock commands a high valuation among its peers, these are justified given the strong growth potential of the company in the highly untapped insurance market.
Positives of the stock: Stable metrics in relation to operations, growth in high margin products and high-quality franchise model are some of the positives of the stock. Plus the annuity business of the company has provided high margins to the company and is the mainstay of the company.
Should you invest?
Experts give a positive to the offer and suggest investors place their bids for shares as part of the offer at a cut off price which is Rs.411. The valuation is attractive and the fair value of the stock is judged at Rs. 450-460. The stock is seen as an attractive long-term investment in the life insurance space.
And further, the company's is expected to fetch good return ratios owing to strong business margin, quality underwriting as well as strong cost-effectiveness.