REPORT ON SECTORAL

ANALYSIS ON
CAPITALISATION,
LEVERAGE AND DIVIDEND
POLICY

Adit Bohra 2120889

Gourish Jain 2120883
Meet Raisinghani 2120845
ABOUT THE
INDUSTRY
​India’s Insurance industry is one of the premium sectors experiencing upward growth. This
upward growth of the insurance industry can be attributed to growing incomes and
increasing awareness in the industry. India is the fifth largest life insurance market in the
world's emerging insurance markets, growing at a rate of 32-34% each year. In recent
years the industry has been experiencing fierce competition among its peers which has led
to new and innovative products within the industry. Foreign Direct Investment (FDI) in the
industry under the automatic method is allowed up to 26% and licensing of the industry is
monitored by the insurance regulator the Insurance Regulatory and Development
Authority of India (IRDAI).
LIFE INSURANCE CORPORATION (LIC)

Life Insurance Corporation of India (LIC) is an Indian central public sector undertaking
headquartered in Mumbai, Maharashtra, India. It is under the ownership of Ministry of
Finance, Government of India. The Life Insurance Corporation of India was established on 1
September 1956, when the Parliament of India passed the Life Insurance of India Act,
nationalizing the insurance industry in India. Over 245 insurance companies and provident
societies were merged together. LIC reported 290 million policyholders as of 2019, a total
life fund of ₹28.3 trillion and a total value of sold policies in the year 2018–19 of ₹21.4
million. The company also reported to have settled 26 million claims in 2018–19. It ranked
98th on the 2022 Fortune Global 500 list with a revenue of ₹775,283 crore (US$97 billion)
and a profit of ₹4,415 crore (US$550 million).
 CAPITAL STRUCTURE
Capital structure refers to the specific mix of debt and equity used to finance a
company's assets and operations.
A company’s capital structure is helpful in understanding its current financial
health, risk profile and compatibility with specific investment or acquisition
strategies. Understanding the dynamics and interplay of debt and equity and
their role in the capital structure of different companies is an essential part of
any investor’s toolkit that will help them assess the viability of a potential
investment or target, as well as its potential for growth.
The debt to equity ratio of LIC stand zero as the company does not require
and finance through borrowings to commence its operations.
 LEVERAGES 5

Operating Leverage Financial Leverage

Operating Leverage is the term for leverage
used in investment-related activities. The
ability of a company to use operational costs
to increase the effects of changes in sales on
its earnings before interest and taxes is
known as operating leverage.
Financial leverage refers to the amount of
debt a business has acquired. On a balance
sheet, financial leverage is represented by
the liabilities listed on the right-hand side of
the sheet. Financial leverage lets your
business continue to make investments even
if you're short on cash. It’s usually preferred
to equity financing, as it lets you raise funds
without diluting your ownership
Combined Leverage
Combined leverage accounts for your
organization’s total business risks. As the
name suggests, combined leverage
aggregates the effects of operating and
financial leverages to present a complete
picture of your company’s financial health.

Leverage FY 2022 FY 2021

Operating Leverage 1.077 1.072

Financial Leverage 1.002 1.000

Combined Leverage 1.079 1.072

 DIVIDEND POLICY
6

• LIC share dividend record date is August 26, as per the exchange filing. It means that shareholders having LIC shares in their Demat account
on the record date will be eligible for receiving the dividend amount. Dividend payment is one of the corporate actions.
• For the year ending March 2022 Life Insurance Corporation of India has declared an equity dividend of 15.00% amounting to Rs 1.5 per
share. At the current share price of Rs 627.70 this results in a dividend yield of 0.24%.
• LIC reported a 17 per cent drop in consolidated net profit to Rs 2,409 crore for Q4 from Rs 2,917 crore in the same quarter a year ago, while
sharing its first earnings after listing in the bourses. The total income of the insurer increased to Rs 2,12,230 crore, from Rs 1,90,098 crore in
the same period of the previous fiscal year.
• The state-owned insurer made its debut on the stock exchanges on May 17, 2022, at a discounted price. LIC shares were allotted to the
investors at Rs 949 apiece. The stock is now about 34 per cent down from its IPO issue price of Rs 949.
 FUTURE OUTLOOK
 The largest issuer in the nation, LIC, plans to increase its
market share in non-participating insurance products and
broaden the mix of distribution channels.
 In the company's annual report for FY22, LIC chairman M. R.
Kumar stated, ‘’We plan to enhance our market share in the
non-par business and broaden the channel mix while ensuring
that our agents remain the key distribution pillars of our
products’’
 The chairman stated that in order to meet the preferences of
the numerous segments with both current and emerging
demands, "digital interventions, data analytics, and process
flow modifications to exploit the potential of the changing
times would be embarked upon."
 The I.T processes between the banks and LIC will be
strengthened as they engage with all of their partner banks.
 For the last 62 years LIC showing growth rate every year.
Even after opening Life Insurance to Private sector for over a
2 decades LIC is the Market Leader capturing two thirds of
Market Share. LIC is going to occupy No.1 position in terms
of Market capitalization in stock Market. LIC will become
much stronger and continue it's leadership in Life Insurance
Market.
 HDFC LIFE INSURANCE COMPANY LTD.

 
HDFC Life Insurance Company Limited is a joint venture between HDFC Ltd.,
India’s leading housing finance institution and abrdn plc (formerly Standard Life
Aberdeen plc) a global investment company.
Established in 2000, HDFC Life is a leading long-term life insurance solutions
provider in India, offering a range of individual and group insurance solutions
that meet various customer needs such as Protection, Pension, Savings,
Investment, Annuity and Health. As on September 30, 2021, the Company had
38 individual and 13 group products in its portfolio, along with 7 optional rider
benefits, catering to a diverse range of customer needs.
HDFC Life sells policies through a multi-channel network. This includes direct
sales through own branches, Insurance agents, Partner Banks and through other
financial institutions. HDFC Life has over 414 branches and 15,406 full-time
employees located across India. Company has over 58,147 individual agents.
 CAPITAL STRUCTURE
Capitalisation refers to the sum of all the funds raised from various long-term sources, it can be debt, equity or
debt-equity mix. The capitalisation of a company helps in determining whether the company is over capitalized,
under-capitalized or fairly capitalized. The capitalization also has an impact on Earning Per Share, as debt up to
a certain amount helps in increasing the EPS.
The capitalisation position of HDFC LIFE ltd. for the past 3 years consists of:

HDFC LIFE Insurance is fairly capitalized because the

company was having almost negligible debt in the preceding
years and also it has the largest market share in the private
insurance sector. It is fairly capitalized because the business has
employed the correct amount of capital and its earnings are
same as the average rate of earnings.
 LEVERAGES 10

DEBT TO EQUITY RATIO

The debt-to-equity ratio or D/E ratio is an important metric in finance that measures
the financial leverage of a company and evaluates the extent to which it can cover its
debt. It is calculated by dividing the total liabilities by the shareholder equity of the
company.
 DIVIDEND POLICY
11

• A dividend is basically a return that one earns on the investment, and mostly the tax is applicable on
dividends.
• Dividend decision is one of the three major decisions and one of the most important dimensions of financial
management.
• Dividend decision is deciding what to do with the surplus, i.e., whether the surplus should be distributed as
dividend or retained back. Dividend can also be received in various ways like Cash dividend, Bonus share,
share repurchase, property dividend, scrip dividend and liquidating dividend.

Dividend (Rs)
2.5

1.5

0.5

0
31st May 2022 30th June 2021 14th March 2019 15th December 2017
FUTURE PLANS, TREND AND FINANCIAL POSITION OF

HDFC LIFE INSURANCE

1.  Low Penetration- The ratio of premium to Gross Domestic Product (GDP) in India is only 2.7 percent compared to a
world median of 3.5 percent, or Thailand’s 4 percent or South Africa’s 11 percent. This makes Life insurance an exciting
high growth sector. So this market HDFC life insurance can capture.

2. Underinsurance- Hdfc life that not only we have the issue of lower penetration, but also under-insurance. People who are
aware and have taken an insurance policy are grossly underinsured. Both these factors mean faster growth opportunities.

3. Fastest growing economy which can lead to buying more insurance products - Our population is only growing at about 1.2
percent. This means, the per capita income will grow at a much more rapid pace. This leaves space for fast growth. In this
HDFC LIFE is launching new products to increase their market share.

4. HDFC Life had acquired 100% stake in Exide Life Insurance Company from its parent Exide Industries for ₹6,687 crore.
And According to our great mentor and Investor Saurabh Mukharejea, as banking sector was revolutionized by private
banking companies in a similar way Insurance sector will be changes by private insurance companies who have greater
share in the market. LIC market share is dropping constantly on a yearly basis. It was 69% in 2019 which decreased to 62%
in 2022 according to data.
 SBI LIFE INSURANCE

SBI Life Insurance is one of the most trusted life insurance companies in India, was
incorporated in October 2000 and is registered with the Insurance Regulatory and
Development Authority of India (IRDAI) in March 2001.
Driven by ‘Customer-First’ approach, SBI Life places great emphasis on maintaining
world class operating efficiency and providing hassle-free claim settlement experience
to its customers by following high ethical standards of service. Additionally, SBI Life
is committed to enhance digital experiences for its customers, distributors and
employees alike.
 CAPITAL STRUCTURE

Capital structure is the particular combination of debt and equity used by a

company to finance its overall operations and growth. Equity capital arises
from ownership shares in a company and claims to its future cash flows and
profits. Debt comes in the form of bond issues or loans, while equity may
come in the form of common stock, preferred stock, or retained earnings.
Short-term debt is also considered to be part of the capital structure.
 LEVERAGES 15

• Leveraged investing is a technique that seeks higher investment profits by using borrowed money. These profits
come from the difference between the investment returns on the borrowed capital and the cost of the associated
interest. Leveraged investing exposes an investor to higher risk.
 DIVIDEND POLICY
16

• Dividend policy is the guideline for dividend distribution drafted by the board of directors of the company. The policy includes parameters
for sharing profits with the shareholders. It also includes how often and in which form the dividends are to be distributed.

• SBI Life Insurance Company Ltd. has declared 4 dividends since April 3, 2018.In the past 12 months, SBI Life Insurance Company Ltd. has
declared an equity dividend amounting to Rs 2.00 per shares. At the current share price of Rs 1226.30, this results in a dividend yield of
0.16%
 FUTURE OUTLOOK
In its recent initiatives ,the company has
launched new pension product with added
features for better customer experience.
The broaden the reach SBI LIFE
INSURANCE has tied up with Indian post
payments bank limited which will help it
to tap unserved markets. Total 9.3 lakh
policies were issued as of September
2022.Focus on agent addition to pedal
premium growth .The company has offset
the impact of the pandemic on business
growth to a large extent. Indians bought
life insurance policies with the pandemic
making them even more willing buyers.
SBI Life’s retail new business premium
growth showed a 36.5% sequential jump,
offsetting the loss of business of the first
quarter
THANK YOU