A Mini Project

BY
Noyal
Prakash
Paripoorani
A project on
Are Indian IPOs overvalued?
Allotment and current price
analysis.
Sector -Health Insurance (SBI LIFE)
01 INTRODUCTION
Why is a company listed in an IPO?

02 IPO’s of last decade

Are Indian IPO’s overvalued?.

03 LIFE INSURANCE INDUSTRY

04 SBI LIFE
.
 Introduction

What is an IPO?

An initial public offering (IPO) refers to the process of offering

shares of a private corporation to the public in a new stock
issuance. An IPO allows a company to raise capital from public
investors.

Why is a company listed in IPO?

The purpose of an initial public offering is to let early investors in the
company cash out their investments.
Other reasons include:
-Companies can raise additional capital by selling shares to the public.
The proceeds may be used to expand the business, fund research and
development or pay off debt.
-Going public in an IPO can provide companies with a huge amount of
publicity

SBI Life Insurance (2017) – the company raised ₹8,389 crore.

 Are Indian IPO’s overvalued?
It was found that there are both undervalued and overvalued IPOs in India. However, IPOs can be
underpriced regardless of whether they are undervalued or overvalued in relation to industry/peers.
Therefore, retail investors should not consider all underpriced IPOs as undervalued and cheap.

Allotment and current price

analysis. As per Nov 2021
report

Modern PowerPoint Presentation

Portfolio Presentation
Life insurance industry

Before 2000, the life insurance business consisted of a single

player - LIC (Life Insurance Corporation of India).

The LIC still continues to dominate the market with a market

share of 71% in new business premiums .

However, among the private insurers, SBI Life accounts for

market share of 20% of new business premiums.

It has the second largest assets under management in the

private life insurance industry of Rs 97,700 crore.
 What SBI does?
SBI Life is in the business of insuring life. Life insurance companies generate their revenue from two
sources:
•Net income generated from selling insurance policies
•Investment income generated out of funds invested

Life insurers typically write three types of policies:

Participating Policy: Where the payout is a combination of the guaranteed payment and a variable
component linked to the insurer’s investment returns.

Non-participating policy: Where the payout is defined by the insurer beforehand.

ULIP: Where the payout is linked to the market with only a small guaranteed component.
(A unit-linked insurance plan is a product offered by insurance companies that, unlike a pure insurance policy,
gives investors both insurance and investment under a single integrated plan)

It’s been around since 2001 and was launched as a joint venture between SBI and BNP Paribas
Strengths of SBI life
Promoted by India’s biggest bank
SBI Life Insurance is promoted by SBI which is the largest public sector bank in India. Its policies are
actively sold in thousands of SBI branches around the country. In FY l7, the bank accounted for a
whopping 41% of SBI Life’s new business premiums.
Pan-India presence
Unlike its private-sector competitors who are focused on the big cities, SBI is spread across the length
and breadth of India and so is SBI Life. As wealth is generated in the hinterlands, it will flow into the profit
statements of SBI Life.
Cost-efficient
SBI Life has the lowest operating expense ratio of 7.8% (operating expenses as a percentage of
premiums) in comparison to 10.5% and 12.2% for ICICI Prudential and HDFC Standard life respectively.
In other words, it spends less money on its operations relative to its premiums.
Sticky
The persistency ratio tells us how many customers continue to pay premiums in subsequent years. At the
end of 5 years, a significant 67% of SBI Life’s customers continue to pay premiums. This compares
favorably to 57% and 56% for HDFC Standard Life and ICICI Prudential life respectively.         
Well-capitalized
SBI Life has a solvency ratio of 2.04 times compared to the 1.5 times mandated by IRDA. The solvency
ratio tests the solvency of the insurer in a worst possible scenario - that all the insurance claims
materialize at once.
THANK YOU