In August, HDFC Life, the fastest-growing private sector life insurance company, entered the coveted Nifty-50, the flagship index of the National Stock Exchange tracked by global investors. The newly listed private insurer is now rubbing shoulders with the likes of HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank. Soon, Life Insurance Corp of India (LIC) is also set to debut on Dalal Street, which, according to experts, could be dubbed as India's ARAMCO moment (the Saudi Arabian oil major recently turned out to be the company with the largest market cap globally). In fact, with a likely valuation of over ₹10 lakh crore, LIC will only be second to Reliance Industries in market cap (₹14 lakh crore), ahead of biggies such as TCS, HUL and Infosys.
The BFSI — banking, financial services and insurance — game is changing the stock market. For decades, banks and non-banking financial firms (NBFCs) ruled the stock market in terms of market cap and investors interest. However, the last few years have seen increasing number of listings from life insurance, general insurance, mutual fund asset management companies (AMCs), pure play credit card companies and small finance banks. Business Today’s listing of top 500 companies in India captures the trend. HDFC Life, for instance, has gone up eight ranks, from 32 to 24. A pure play credit card company, SBI Cards & Payments, which got listed this year, has been ranked 43rd in the very first year. HDFC AMC has improved its ranking from 75th to 49th position. Small finance banks have also found a place among the top 100 companies.
So, what is working in their favour?
A well-established brand name, global tie-ups, a stable business model with existing operation of 15-20 years, profitability, and a huge opportunity to grow the business are some of the reasons for investor interest in these companies. “We have now widened and deepened customer offerings. Globally, financial services comprise deposit-taking machines, or banks, asset management companies for investments and life insurance entities for protection as well as investments,” says Vimal Bhandari, a veteran in financial services, who sits on boards of RBL Bank, Piramal and DCM Shriram Group.
According to Amit Tandon, Founder and MD of proxy advisory firm IiAS, and former MD of Fitch Ratings in India, these are all professional companies with pedigree of large institutions. “In the next decade, linkages with their parents will tend to fray because of regulatory and other factors to make them truly professionally run companies,” he says. Investor interest, including from global companies, also stems from the professional management and independent boards of these new listers.
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November 29, 2020