HDFC Standard Life Insurance Co Ltd (HDFC Life) started as a JV between HDFC
Ltd, India’s largest Housing Finance Company and Standard Life Aberdeen Plc.
HDFC Life is the countrys third-largest private sector life insurance company with
16.5% share of total private sector premiums in FY2017. Based on the new
business premium (NBP), it ranked second with a market share of 17.2%. It had
robust NBP margin of 22% for FY2017 vis-à-vis 10-19% of peers.
Outlook & Valuation: At the upper band of `290 the issue is valued at 4.2x of
2QFY2018 embedded value (EV) of `14,011cr, bit higher than close listed player
SBI Life and ICICI Pru which is trading at 3.6x and 3.3x of 2QFY2018 EV
respectively. However, we believe slight premium is justifiable, considering,
consistent growth across premium categories, improving dividend payout over last
4 years, strong parentage, trusted brand name, highest VNB margin (22% for
FY2017) and well balanced business mix. Based on the above positive factors we
assign SUBSCRIBE rating to the issue.

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