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ICICI Lombard ... IPO??


triedtestedand
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Could this be the use for the $400 debt issue?  To raise the FFH stake in ICICI Lombard to 49%.

 

"The insurance entities will be able to come out with flotations only after the government raises the cap on foreign stake to 49 per cent from 26 per cent. A bill in this regard was introduced in Parliament last December. Another rule stipulates that a private insurer can float an IPO only after it has been in operation for 10 years."

 

 

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"The insurance entities will be able to come out with flotations only after the government raises the cap on foreign stake to 49 per cent from 26 per cent. A bill in this regard was introduced in Parliament last December. Another rule stipulates that a private insurer can float an IPO only after it has been in operation for 10 years.

 

According to Section 6AA of the Insurance Act, 1938, a promoter holding over 26 per cent in an insurance company will be required to divest in a phased manner after a period of 10 years from the date of commencement of the business or as prescribed by the central government."

 

I'm confused. The first paragraph suggests they can IPO after they change the rule allowing more foreign ownership and after the business has been operating for 10 years. The second paragraph seems to suggest that a "promoter" with more than 26% must divest after the business has been running more than 10 years. Who is the promoter and who must divest? The bank or an investor like FFH? If the bank then the two statements are aligned. If FFH then this suggests they have to start selling if an IPO happens, not start buying.

 

???

 

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In rereading the article , it seems to me that "promoter" would refer to the bank. Dont know the use of the word, but it states that those holding over 26% must divest in a phased manner.  FFH holds 26% but not over.

 

Also trying to figure out value of ICICI, FFH valued ICICI at $428.5 for their 26% on a fair value basis in the 2008 AR which would put

the 23% possibly available at $379 which is not far from the debt just issued.

 

Although I'm sure their valuation is conservative compared to actual value.  Guess we will know that value if and when an IPO occurs.

 

Any guess's out there on the actual valuation for ICICI.

Thanks, Gary

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In rereading the article , it seems to me that "promoter" would refer to the bank. Dont know the use of the word, but it states that those holding over 26% must divest in a phased manner.  FFH holds 26% but not over.

 

Also trying to figure out value of ICICI, FFH valued ICICI at $428.5 for their 26% on a fair value basis in the 2008 AR which would put

the 23% possibly available at $379 which is not far from the debt just issued.

 

Although I'm sure their valuation is conservative compared to actual value.  Guess we will know that value if and when an IPO occurs.

 

Any guess's out there on the actual valuation for ICICI.

Thanks, Gary

 

So if the promoter is indeed the bank then the rules suggest they must IPO and reduce their stake below 74% which would enable FFH to increase theirs. I like it. It's an interesting regulation. I wonder how low ICIC needs to take their ownership?

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I think initally FFH share would react negative to this increase, even thought it is a great oppertunity longterm.  It would seemed to the uneducated that they raise capital to purchase an emerging market asset (more risk). 

 

If we are lucky enough do we get 2 great buying oppertunities in two quarters?  If it sells off, I'd be loading up on shares for sure.

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