HDFC Life Insurance Set to Raise Rs.2,000 Crore via NCDs

HDFC Life Insurance Company Ltd. has announced its plan to raise Rs.2,000 crore through non-convertible debentures (NCDs). The company’s Capital Raising Committee (CRC) is scheduled to meet on September 27, 2024, to approve the commercial terms of the issuance, which was first announced in July. This follows the board’s approval on July 15 to raise the funds over the next 12 months in multiple parts.

Details of the NCD Issue

This Rs.2,000 crore fund will be raised through unsecured, rated, listed, redeemable, fully paid-up, non-cumulative, subordinated NCDs on a private placement basis. The upcoming CRC meeting will finalize the terms and conditions of the debt issuance, including the interest rates and other commercial aspects. The funds will be raised in phases, subject to regulatory approvals, allowing the company flexibility in its financial plans.

Financials & Market Position

HDFC Life’s recent financial results have been positive. For Q1FY25, the company reported a 15% year-on-year (YoY) increase in net profit, reaching Rs.479 crore, compared to Rs.417 crore in the same period last year. The net premium income also saw an 8.9% rise, totaling Rs.12,509.6 crore.

The insurer’s annualized premium equivalent (APE) grew by 23%, while new business premiums increased by 9% to Rs.6,400 crore. HDFC Life’s private market share in the life insurance sector grew from 16.4% in Q1 FY24 to 17.1% in Q1FY25, and its overall market share in individual weighted received premiums rose to 11.4%. The company’s assets under management (AUM) crossed Rs.3 lakh crore, marking a 22% growth.

Stock Performance

Yesterday,  HDFC Life’s stock closed 1.04% lower at Rs.719.70. Despite the dip, the stock has gained 11.4% year-to-date. Most analysts remain optimistic, with 28 out of 33 rating the stock as a ‘buy,’ implying a potential upside of 5.6%.

Conclusion: HDFC Life’s NCD issuance plan aligns with its growth plans and financial stability. With good financial results and increasing market share, the company seems well-positioned to utilize the additional capital for future expansion.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.