Life insurance industry to recover in next quarter, says CARE Ratings

CARE Ratings, in a note, said growth could potentially return in Q2 or Q3 and distribution channels could see significant realignment, with digital sales rising at the cost of individual agents.

Life insurers, which have seen their first-year premiums contract 18.6 per cent in the first quarter of the financial year 2020-21 (FY21), could see recovery in the next quarter, said CARE Ratings. Life insurers also saw the sum assured decline 12.9 per cent from Rs 10 trillion in Q1FY20 to Rs 8.8 trillion in Q1FY21. However, despite a sharp dip in premiums, experts believe the industry is recovering from the initial shocks of the lockdown as June was better compared to May and April.

CARE Ratings, in a note, said growth could potentially return in Q2 or Q3 and distribution channels could see significant realignment, with digital sales rising at the cost of individual agents and bancassurance.

Life Insurance Corporation, the country’s largest life insurer, has 74 per cent market share, against private insurers’ 26 per cent, notwithstanding the technological deficiencies it has against its counterparts in the private sector.

Among the private insurers, five of the 23 have reported growth. SBI Life has the largest market share among private insurers in terms of first-year premiums, followed by HDFC Life, ICICI Prudential, Aditya Birla Sun Life, and Max Life.

UTI AMC gets Sebi nod for initial public offering to raise Rs 3,000 cr

The IPO of the country's largest AMC in terms of total AUM comprises sale of 38,987,081 equity shares by existing shareholders.

UTI Asset Management Company (AMC) has received markets regulator Sebi’s go-ahead to raise a little over Rs 3,000 crore through its initial public offering (IPO).
The IPO of the country’s largest AMC in terms of total assets under management (AUM) comprises sale of 38,987,081 equity shares by existing shareholders, according to the draft red herring prospectus (DRHP).

State Bank of India (SBI), Life Insurance Corporation (LIC), and Bank of Baroda (BoB) are offering to sell 10,459,949 shares each, while Punjab National Bank (PNB) and T Rowe Price International are planning to offload 3,803,617 shares each. The public offer is expected to raise a little over Rs 3,000 crore, market sources said.

UTI AMC, which had filed draft papers with Sebi in December 2019, obtained its observations on June 16, latest update with the markets watchdog showed.

Sebi’s observations are necessary for any company to launch public issues, including initial share-sale, follow-on public offer and rights issue.

SBI, LIC, PNB, and BoB hold 18.5 per cent stake each in UTI AMC. The US-based T Rowe Price holds 26 per cent stake in the company.

Kotak Mahindra Capital, Axis Capital, Citibank, DSP Merrill Lynch, ICICI Securities, JM Financial, and SBI Capital Markets are the bookrunning lead managers to the offer.

LIC Housing Finance likely to recover Rs 3,000 crore worth NPAs

The target is to get back about 50 per cent of gross non-performing assets (GNPAs), Managing Director and Chief Executive Siddhartha Mohanty said.

LIC Housing Finance is likely to recover about Rs 3,000 crore from borrowers in the current financial year to improve asset quality, an uphill task in a year when the Indian economy is expected to contract.

The target is to get back about 50 per cent of gross non-performing assets (GNPAs), Managing Director and Chief Executive Siddhartha Mohanty said.

LIC HFC’s asset quality profile came under pressure with GNPAs rising to 2.86 per cent in March, from 1.54 per cent a year ago. Net NPAs also went up to 1.99 per cent, from 1.08 per cent. Its total outstanding portfolio stood at Rs 2.1 trillion in March, up from Rs 1.9 trillion last year.

LIC HFC’s provisions for expected credit loss stood at Rs 2,612.39 crore as of March 31, as against Rs 1,659.48 crore a year ago.

ALSO READ: LIC Housing Finance posts 16% fall in pre-tax profit at Rs 826.72 crore

Mohanty said the asset quality might face further pressure due to risk slippages from part of the loan portfolio, which is under moratorium. At present, about 25 per cent of loan book is under moratorium. The RBI has permitted HFCs, finance companies, and banks to grant moratorium on term loans for EMIs till August to soften adverse effect on borrowers due to the lockdown.

While calculating expected credit loss, the company has taken into account its historical experience of losses, updated to reflect current conditions and moratorium.

Covid-19 impact: Missing disinvestment targets will have consequences

Any slippage in disinvestment numbers combined with other revenue shortfall would mean the govt would have to borrow more in the market.

The economic travails this year will be challenging, and from the economist’s perspective, economic growth and fiscal deficit are the two main challenges. The government had embarked on a very ambitious disinvestment programme for the year of Rs 2.1 trillion. It sounded optimistic as we have never delivered such an amount before. The highest was Rs 1 trillion in FY18. The present programme includes the sale of Air India, Life Insurance Corporation of India (LIC) and Bharat Petroleum Corporation Limited (BPCL), which made this very aggressive target look possible.

For disinvestment to take place, there need to be a good number of buyers as well as valuation. Else, like in the past, divestment becomes an exercise of one public sector undertaking (PSU) buying into another. The challenge today is that the conditions do not look congenial and the market is just too volatile. The stock market has touched a new low post the announcement of a shutdown. There seems to be no sign of the shutdown ending or even a plan as to what should be done once this ends. Realistically speaking, FY21 will be a washout. The market is unlikely to reach the January levels anytime soon and unless it is moving in the upward direction continuously for three months, can one be assured that the valuation will be fair?

The other factor is the kind of disinvestment we are looking at. BPCL no longer looks as attractive with the price of oil below $30/barrel and the future of the sector being uncertain. A global recession is for sure, which means that oil prices will be depressed and the sale of such an enterprise will remain unattractive. Next, Air India has been on the block for some time now, and there is no clear plan about how to go about it given the overhang of debt which is around Rs 60,000 crore. To top it all, the future of the aviation industry is in jeopardy following the breakout of the pandemic as movement across countries will remain barred for at least six months after normalcy returns.

SBI board approves exploring 'investment opportunity' in YES Bank

A salvage plan including SBI and Life Insurance Corporation of India was being talked about and a declaration right now be made soon

Yes Bank Share : The State Bank of India board has given on a fundamental level endorsement to consider a "venture opportunity" in YES Bank. In a late night proclamation on Thursday, SBI, be that as it may, said no choice had at this point been taken to get stake in the bank.

Exceptionally put sources showed a salvage plan including SBI and Life Insurance Corporation of India (LIC) was being talked about and a declaration right now be made soon.

While the better subtleties of the arrangement are being worked out, it is foreseen that both SBI and LIC together will take a 51 percent stake in the bank, with a one-year lock-in period.

LIC as of now possesses 51 percent in IDBI Bank, which it obtained in 2018 to inject capital into the upset loan specialist.

Sources said both the state-possessed associations would hold the offers as speculation. LIC as of now possesses 8 percent in the private loan specialist.

The sources said YES Bank needed to practice its call choice on ceaseless bonds or extra level 1 (AT1) obligations of Rs 80 crore on March 5. "The bank hasn't practiced its call choice," said a source. Inability to have met the bond commitment is said to be the trigger for the purposeful activity.

As of late, CARE Ratings downsized YES Bank's appraising on bonds worth Rs 21,016 crore to acknowledge watch for negative ramifications. These bonds were at that point put under negative rating.

On the salvage plan, specialists said the need is rebuild the asset report. "Resources should be brought down to feasible worth and that overview will demonstrate how a lot of capital is required for the bank," said a financial advisor.

LIC listing may take about a year, says Finance Secretary Rajiv Kumar

Kumar said the idea behind the listing of LIC was to "bring in more transparency and allow the company to share gains with its stakeholders".

The listing of Life Insurance Corporation (LIC) will likely take about one year and the government is not willing to sell more than 10 per cent stake in the insurance behemoth.

“We are already in touch with the Department of Investment and Public Asset 

Management (Dipam) to understand all the processes involved. The LIC Act will have to be amended. It’s not possible to do it in six months and may take around one year,” Finance Secretary Rajiv Kumar said in a media interaction on Sunday.

Kumar said the idea behind the listing of LIC was to “bring in more transparency and allow the company to share gains with its stakeholders”. “It is very important as it will bring in the disclosure norms,” he said.

The sovereign guarantee for all policies issued by LIC will continue, the secretary added.

A top government official said the enterprise value of LIC was roughly Rs 36 trillion “according to the latest figures in the balance sheet”. The official said the government might not dilute “more than 10 per cent” in LIC. “It will certainly be less than 10 per cent,” the official added.

The government might seek exemption from the Securities and Exchange Board of India (Sebi) to offload less than 10 per cent in the initial public offer (IPO).

All companies are required to offer at least 10 per cent in the IPO.

Finance Minister Nirmala Sitharaman had announced a stake sale in LIC through an initial public offer in the Union Budget of 2020-21.

The government aims to mop up Rs 90,000 crore from the listing of LIC and stake sale in IDBI Bank. The government currently owns 100 per cent in LIC.

On the stake sale of IDBI Bank, which is substantially owned and controlled by LIC, Kumar said the government was exploring various options, including a strategic stake sale. The government currently holds around 46 per cent in IDBI Bank.