What is the best option to invest in Stock of HDFC Life Insurance?

If I am correct and merger goes through as planned , indirectly we can buy 2.33 shares of HDFC life by investing in one share of Max financial. Max financial share is cooling off ie correcting. What are members view, will Max financial share correct further more or any body think it is better to buy HDFC life after its listing only. What will be the best option to buy HDFC life insurance stock for long term.

 

It seems that the deal is a bit sweeter for Max shareholders. Considering that the current valuation of Max Financial is around 13k crores (and correcting) while the final valuation that it will get if this merged entity is going to be 65k crore and Max will have 31 percent stake -> 20k crore.

However, I would still say that if you invest in largecaps and plan to hold it for longer term, then probably this swap ratio will not matter much. Insurance still has a long way to go and this co. can grow 15-20% annually.

I also read that post AB Nuvo and Grasim merger, the shares of Birla Financial Services will get listed separately. I suspect this is probably being done to simplify consolidation which is currently happening in this space. I have Bajaj Finserv on my radar and also Exide for further consolidation.

 

it'll definitely not be a ratio that favours Max for various reasons, the primary being, HDFC Life is bigger than Max in terms of business and valuation

Max promoter will be taking a fee and step aside with no representation on HDFC Life board (like Hutchison - Vodafone)

the money to be made was buying it before restructuring, would've ended up with virtually free shares of Max Ventures and Max India

before the merger announcement, HDFC Life was available for ₹180-200 & shot up to ₹250-260 levels

the swap ratio will matter, if you held shares in the erstwhile Max India from a long time, then it'd be a different story

 

@BombayBoy not clear to me how will this not be in favor of Max investors if the current valuation is less than the final valuation on max shareholding after merger? I am not asking sarcastically or in any demeaning manner, I just want to learn the rationale. While I understand the rest of your points, I was not clear on that part.

Thanks!

 

hello,

apologies for the late reply, was without a PC

maybe i'm taking things at face value or just over simplifying it - HDFC Life being the bigger player

but consider this

source: live mint

it's a long time to go and with the imminent IPO of ICICI Prudential, HDFC Life won't be the first to get listed and things will change (if exposure to an insurance co is what you're looking at)

i've exited Max Financial after the merger announcement and only hold Max India now

whatever happens, the gains are for Max promoter - Analjit Singh in the non-compete fee and not the minority investors who'll hold shares of HDFC Life after a year instead of Max Financial!

 

In my view, game is not short term, now through Max financial we can get HDFC life shares, and HDFC life will be good long term hold for next 10 years for 15% CAGR return, which is good for conservative investors like me.

 

Ok thanks! .

 

you can buy HDFC Life right now if you want to, quoted anywhere between ₹225-250 and the transfers are handled by the company, need to send a transfer form attested by your DP because the ISIN is in a suspended status

you're welcome!

 

Good insight this. Thanks.

Couple of points -

1. Dear BombayBoy - can you please help me with the details of the company/ies that are dealing with HDFC Life stocks at present.
Thanks

2. Should we not see a huge uptick in ICICI Bank also in view of planned listing of I Pru Life, which should get valued at 55,000 Cr+

 

hello saashy

there are a few - Abhishek Securities, Dharavat, 3A Capital and a lot of deals happen through references

i bought RBL Bank & HDFC Life from 3A but their rates are high (if we buy in retail quantities, rates will be high regardless) and you are assured about delivery of shares

check this blog Junk Shares India

regarding ICICI Bank, it's already run up, isn't it?

PS : i'm not a broker or a dealer but if you need any help with unlisted shares, drop me a message and i'll help you with the information and contacts that i have

 

https://www.chittorgarh.com/ipo/icici_prudential_life_ipo/571/

Likely this month itself ?

Thanks a lot BombayBoy, for extending this help. I do have HDFC Life shares ( through ESOP route ) and been contemplating what could be the best way to deal with them.
What would be your view, to look at to sell a part ( am not sure the current rate ) .. or wait till the indirect listing happens. Which has been largely my view.
As this discussion may not be if the interest to many .. Would it be okay ( and appropriate as per the forum rules ) if I can have a separate discussion with you.
Thanks so much .

 

@BombayBoy, At these levels would you know the P/E and P/B ratios?

 

~ 60 times FY 16 earnings, pretty costly, ain't it?


~ 15 times FY 16 book value

quarter ending June 16 EPS ₹1.23 vs ₹1.14 (YoY) & book value ₹17.37 vs ₹14.11 (YoY)

PE & PBV would not be the best to value an insurance business, embedded value is the metric (it's all just from what i've read, am not professionaly qualified at any of it)

 

HDFC Life is not a leader among private insurance companies, rather its position not fall in the first 10 companies. Why everyone is running after HDFC ? After merger it may be a good entity

 

I would rather adopt a wait and watch strategy for the insurance listings. Let the dust settle before deciding. Indian markets have a fetish to anything new treating it fancy. I think Insurance isnt generally a money spinner.

Appraisal value is a step ahead of Embedded Value. But these remain concepts and remain beyond the reach of ordinary/small investors.

@saashy, you mention I Pru Life getting a valuation of 55,000+ cr valuation. Any insights you can share on this value

 

@saturn,

When I wrote this, IPO details were not out. As things stand now, at the maximum of the band (334), the valuation comes to be around 48000 Cr.
55000 Cr that I quoted earlier was based on
1. The valuation that HDFC Life + Max Life commands today ( extrapolating Max life valuation today - which itself is derived from MFC valuation ) - this is approx 67,000 Cr today as per my calculation.
2. I Pru business performance

I may be wrong (and I am not really qualified to do a comprehensive analysis), but my own expectation is still that in few days post listing I Pru valuation is likely to be at 55,000 Cr +

 

Talking of ICICI Pru IPO, 1600 Cr+ investment by Anchor investors is at Rs334 price . This leads to 48000 Cr of valuation. Listing / post listing gains are generally expected to be good as well, even though volumes are high and will have some impact.

 

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Unlisted shares of BSE, ICICI Lombard, FINO, TMB and Kurlon etc are good. Pre IPO stocks are available from buysellunlistedshares.com

 

ICICI Pru oversubscripted abt 4.3times. Lukewarm response or.....

People, views please