Canara HSBC Life Insurance is set to boost its value of new business margins after its upcoming IPO. The company aims to diversify its product mix and expand distribution channels. This strategic move follows a period of adjustment in the insurance industry.
Managing director Anuj Mathur highlighted the focus on gradual margin improvements. The VNB margins reached 20% in FY24 but dipped to 19% in FY25. They have since recovered to 19.5% through product repricing and other measures.
The industry is settling into a new normal after last year’s surge in unit-linked products. Mathur emphasized the company’s commitment to steady growth. This approach ensures sustainable financial health.
Assets under management have surpassed ₹43,000 crore, showcasing strong performance. The three-year weighted premium income grew by 17%, outpacing the industry average. This growth rate is nearly double the sector’s 10-11%.
The IPO marks the first life-insurance public offering in eight years. It involves raising ₹2,517 crore through an offer-for-sale of 237.5 million shares. Promoters include Canara Bank, HSBC Insurance Asia-Pacific, and Punjab National Bank.
Post-IPO, Canara Bank’s stake will decrease from 51% to 36.5%. HSBC’s share will drop slightly from 26% to 25.5%, while PNB’s falls to 13% from 23%. The IPO opens on October 10 and closes on October 14.
Listing is scheduled for October 17 with a price band of ₹100-106 per share. Mathur described this as a pivotal moment for the company. It enables wider investor participation and increased market visibility.
The pricing reflects 1.3-1.4 times the FY25 embedded value of around ₹6,200 crore. This represents a discount compared to peers like HDFC Life. Investors may find significant value in this pricing strategy.
Proceeds from the IPO will go entirely to the selling shareholders. This move supports the promoters while fueling the company’s expansion plans. It aligns with long-term growth objectives.
About 70% of business originates from Canara Bank, with HSBC contributing up to 15%. Regional rural banks add 6-7%, and digital channels account for around 8%. This diversified sourcing strengthens resilience.
The bancassurance model remains highly cost-efficient, supported by agreements through 2033. This long-term stability allows for focused growth initiatives. It underpins the company’s competitive edge.
Canara HSBC Life plans to scale alternate distribution to rebalance its business mix. This includes expanding beyond traditional bancassurance channels. The goal is to enhance market penetration.
The insurer operates across 15,700 branches nationwide, including semi-urban and rural areas. This extensive network supports its outreach efforts. It ensures accessibility to a broad customer base.
Profitability has been maintained for 13 consecutive years, with break-even achieved in the fifth year. Solvency stands at around 2.0, deemed adequate to support growth. This includes the new agency channel development.
The IPO represents a strategic inflection point for future endeavors.