TPL plans to raise Rs50m through IPO

LAHORE - The TPL Direct Insurance Limited (TPL) is looking to raise up to Rs50m through an IPO, which was opened on Monday. The TPL has already raised Rs100m through the book building process. The cumulative equity injection of Rs150m in to the company is expected to support the existing and future working capital requirements. According to equity market experts, the company is planning to offer 5 million shares to the general public at Rs10 (strike price determined through the book building process). They said that the injection of additional equity into the company will support the existing working capital requirements. The proceeds will also help meet the enhanced working capital requirements arising from the launch of new products. The company plans to launch Home Insurance, Health Insurance, Bancassurance and new products for motor insurance. TPL was launched in 2005 as the first direct insurance company in Pakistan with over 12,000 customers. It operates through 5 major cities i.e. Karachi, Hyderabad, Multan, Faisalabad and Islamabad. The company operates with a focused approach, emphasizing on niches where it has an advantage. The car insurance provides synergies with its parent entity. As a result, Motor portfolio of the company contributes 99.81 percent to the total premium underwritten. TPL shares 4.3 percent of the industrys motor premium. The IPO is being offered at Rs10, which is higher compared to its book value of Rs6.31 (Dec 2010). The rationale provided for offering above the book value is that the company enjoys the lowest claim ratio in the industry at around 40 percent. It has the lowest credit period in the industry with 12,000 customers. PACRA has assigned a rating of A-. Experts said that the offering appears to be slightly expensive compared to industrys average PBV of 0.78x.

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