Indiafirst Life Insurance Company Limited Has Filed DRHP for an IPO with SEBI on 26.10.2022

Indiafirst Life Insurance Company Limited Has Filed DRHP for an IPO with SEBI on 26.10.2022

Indiafirst Life Insurance Company Limited has filed DRHP with SEBI to launch its IPO. The company is backed by India’s third largest PSU bank, Bank of Baroda which holds 65% stake in the company followed by Carmel Point Investment India and Union Bank of India with 26% and 9% stakes respectively. The IPO comprises both fresh issues and an Offer for Sale.

Business Model of Indiafirst Life Insurance IPO?

The Company carries on business in the areas of life Insurance, health Insurance & pension. The company product portfolio ranges across various segments within retail and group products.

As of June 30, 2022, the company offered 29 retail products, 13 group products along with six riders, along with policies under the PMJJBY scheme, catering to protection, savings, health and retirement needs of customers. The Company’s retail product portfolio in India comprises nine participating products, 16 non-participating products and four unit-linked products. These products are distributed through individual agents, corporate agents, banks, brokers, the company’s proprietary sales force and the Company website.

Indiafirst Life Insurance Company Limited is one of the fastest growing private life insurers in India in terms of New Business IRP in Fiscal 2022. (Source: CRISIL Report). The company also recorded the highest growth in terms of New Business IRP amongst life insurers with PSU bank parentage, with a CAGR of 27.3%, for the five-year period ending Fiscal 2022.

Who is the Management of the Indiafirst Life Insurance IPO?

As on the date of this Draft Red Herring Prospectus, the following is the management of the company:

(i) Sanjiv Chadha is the Chairman and Non-Executive Director of our Company. He holds a bachelor’s degree in arts (honors) from University of Delhi. He is currently the managing director and chief executive officer of Bank of Baroda and has significant experience in the banking and financial services industry.

(ii) R.M. Vishakha is the Managing Director and Chief Executive Officer of our company. She holds a bachelor’s degree in commerce from Osmania University and holds a post graduate diploma in computer systems from the Institute of Public Enterprise, Hyderabad.

Why is Indiafirst Life Insurance raising funds via IPO?

As per the DRHP filed with SEBI, the Company proposes to utilize the Net Proceeds from the Fresh Issue towards augmentation of its capital base to support solvency levels.

Further, the proceeds from the Fresh Issue will also be used towards meeting the expenses in relation to the Offer.

In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges, including enhancement of the Company’s brand name and creation of a public market for Equity Shares in India. The company will not receive any proceeds from Offer for Sale.

Is there any OFS in the IPO?

As per the DRHP, the IPO comprises both a fresh issue and an offer for sale. The size of the fresh issue is up to 500 crore, whereas OFS is up to 14,12,99,422 equity shares by the promoters and existing shareholders of the company. Bank of Baroda will sell 8,901,15,734 equity shares, while Union Bank of India will sell 1,30,56,415 equity shares in the OFS. Carmel Point Investments India would sell 3,92,27,273 equity shares.

The Financials of the Indiafirst Life Insurance IPO?

In each of the past three years, except 2021, the company has been at a loss. Even in the first quarter of FY23, the company suffered a loss. In FY22, the total income of the company increased 2% to Rs. 216 crore as against Rs. 211 crore in the previous financial year.

Expenses of the company reported an astounding increase of 174% to Rs. 498 crore compared to Rs. 181 in the previous financial year.

The company reported a loss before tax of Rs. 281 crore in Fy22 as against profit before tax of Rs. 31 crore in the previous financial year.

The loss after tax was Rs. (281), as against profit before tax of Rs. 31 crore in the previous financial year.

Total assets increased from Rs. 17295 crore as of March 31, 2021 to Rs. 19451 crore as of March 31, 2022, an increase of 12.46%. Total liabilities increased from Rs. 17295 crore as of March 31, 2021 to Rs. 19451 crore as of March 31, 2022, an increase of 12.46%.

Risks in The Indiafirst Life Insurance Company Limited IPO?

1. Any Termination of Bancassurance Arrangements

Any termination of, or adverse change in, bancassurance arrangements, and in particular the bancassurance agreement with one of the promoters of the company, Bank of Baroda, or a decline in performance standards of the bancassurance partners, may have a material adverse effect on the business of the company, results of operations, and financial condition.

2. Complex Regulatory Requirements

The company is subject to complex regulatory requirements and if it fails to comply with these regulatory requirements, the operations could be disrupted or it may become subject to significant penalties. The company is governed by exhaustive and complex laws, regulations, rules, and guidelines issued from time to time by the IRDAI and other regulatory, statutory, and other regulatory/statutory/governmental authorities in India.

3. Risk of Catastrophes

The occurrence of natural or man-made disasters and catastrophes, could materially increase our liabilities for claims by policyholders and result in losses in investment portfolios, which could in turn have a material adverse effect on the financial condition results of operations and cash flows. The insurance industry, particularly the health and life insurance markets, is exposed to the risk of catastrophes, such as pandemics or other catastrophic events that cause a large number of hospitalizations and deaths. The life insurance business is exposed to the risk of catastrophic mortality due to events that cause a large

4. Setting Wrong Reserve for Products

If actual claims are experienced and other parameters are different from the assumptions used by the company in pricing and setting reserves for its products, it could have a material adverse effect on its business, financial condition, and results of operations. As is customary in the life insurance industry, the company prices its products based on assumptions and estimates for future claim payments as per policy conditions, expenses and commission, expected investment return in the future, and other parameters. The assumptions regarding mortality/morbidity are derived from historical experience, expected future outcomes, industry data, and data from reinsurers. Therefore, there may be a risk that the model and parameter assumptions the company makes are not appropriate.

5. Covid-19 and Similar Events

The COVID-19 pandemic, and similar events, could adversely affect all aspects of the company business, including:
(i) Restricting the ability to sell the products of the company
(ii) Significantly increasing the expenses due to changes in laws and regulations and investing in new methodologies to overcome the restrictions brought in to address the spread of COVID-19 and the adverse changes in population mortality/morbidity or utilization behaviors
(iii) Adversely Affecting investment portfolio and adversely affecting its operational effectiveness overall number of hospitalizations and deaths, such as the COVID-19 pandemic.