14th April, 2024

Vspartans Consultants Pvt Ltd

Research Report - General Insurance

Corporation of India
NSE Code: GICRE
Recommendation: Buy
Current Price: INR 325
Target: INR 441
Potential Upside: 36%
Expected Holding Period: 6-12 months
Financial Ratios:

Market Cap Rs 56965 Cr Promoters 85.8%

Holding

Current Price Rs 325 Pledging % 00.0%

52 Wk High/Low Rs 468/142 Debt to Equity 0.00

PE Ratio 8.33 EPS (TTM) 38.96

Book Value 272 Dividend Yield 2.22%

ROCE 19.8% ROE 17%

Overview of General Insurance Corporation of India

General Insurance Corporation of India (GICRE): Leading the Indian

Reinsurance Sector

General Insurance Corporation of India (GICRE) stands as the foremost Indian

reinsurance company, holding the 16th position globally among reinsurers with
a commanding ~67% (FY23) share in the Indian market. Reinsurance, a strategic
risk-sharing practice among insurers, allows companies to mitigate potential
losses by purchasing insurance policies from other insurers. GICRE is the sole
Indian reinsurer registered with regulatory authorities and listed on Indian stock
exchanges. Its reinsurance services support 54 direct general and life insurance
companies in India, positioning it as a key repository of sector knowledge and
data.

Historical Overview:

Established under the General Insurance Business (Nationalization) Act of 1972,

GIC was tasked with overseeing, controlling, and conducting general insurance
business in India. Following independence, the Government of India (GOI)
nationalized 55 Indian insurance companies and the operations of 52 insurers
engaged in general insurance. In November 1972, GOI established GIC to manage
the amalgamation of these entities, which were subsequently merged into four
companies: National Insurance Company Limited, The New India Assurance
Company Limited, The Oriental Insurance Company Limited, and United India
Insurance Company Limited (a wholly-owned subsidiary of GIC).

Diversified Portfolio: GIC's Extensive Reinsurance Offerings

General Insurance Corporation of India (GIC) boasts a wide array of reinsurance

services spanning various business lines, including fire (property), marine,
motor, engineering, agriculture, aviation/space, health, liability, credit and
finance, and life insurance. Its reinsurance support extends to 54 direct general
and life insurance companies in India, establishing it as a significant repository
of sector knowledge and data.

GIC Re concentrates on key segments such as Property, Agriculture, Liability,

Motor, and Health insurance. As a dominant reinsurer in the domestic market, it
provides reinsurance to direct general insurance companies in India. GIC Re
receives a statutory cession of 5% on each policy, subject to certain limits,
which contributes to its relatively non-cyclical business model, providing a
stable and steady business profile.

Global Footprint: GIC's International Reach

General Insurance Corporation of India (GIC) derives approximately 33%

(9MFY24) of its Gross Written Premium from its foreign subsidiaries, showcasing
a robust international presence across about 140 countries. The company
strategically leverages Lloyd’s syndicate to further expand its global footprint. It
serves as a reinsurance solutions partner for the Afro-Asian region and has
begun leading the reinsurance programs of numerous insurance companies in
SAARC countries, South East Asia, the Middle East, and Africa.

To ensure easy accessibility, efficient service, and tailored reinsurance solutions

for its international clientele, GIC has established offices in key locations such
as the UK, Russia, UAE, and Malaysia. The Corporation operates three overseas
offices, including branch offices in London, Dubai, and Malaysia.
GIC's global presence extends through three wholly owned subsidiaries: GIC Re
South Africa Ltd., Johannesburg; GIC Re, India, Corporate Member Limited,
London; and GIC Perestrakhovanie LLC, Moscow. Additionally, the Corporation
has made strategic investments in the share capitals of various insurance
entities, including Kenindia Assurance Company Ltd., Kenya; India International
Insurance Pte Ltd., Singapore; Asian Reinsurance Corporation, Bangkok; East
Africa Reinsurance Company Ltd., Kenya; and GIC Bhutan Re Ltd., Bhutan.

Product Mix: Gross Premium Distribution

General Insurance Corporation of India (GIC) boasts a diversified product mix,

with the following distribution of Gross Premium across various segments:

Fire Insurance: 33%

Marine Hull Insurance: 1%
Marine Cargo Insurance: 13%
Agriculture Insurance: 11%
Health Insurance: 13%
Motor Insurance: 21%
Miscellaneous Others: 4%
Life Insurance: 4%

Subsidiaries and Associates

Subsidiaries:

GIC Re South Africa

GIC Re Corporate Member
GIC Perestrakhovanie LLC

Associates:

Agriculture Insurance Corporation of India

GIC Re Bhutan Re
India International, Singapore
Employee Statistics:

The company has a total employee strength of 435, with an average employee
age of 42 years. Among the workforce, 35% are female employees.

Expanding General Insurance Market: A Significant Opportunity for

Reinsurance Industry

The general insurance sector in India is projected to witness a substantial

growth, with an estimated compound annual growth rate (CAGR) of 9.9% from
2021 to 2026. This growth trajectory is expected to drive reinsurance premiums
in India to reach USD 12 billion by 2025.

Market Leadership and Growth Potential:

Given its robust financials, sufficient capacity, and expertise, General Insurance
Corporation of India (GICRE) is poised to maintain its market leadership in the
reinsurance industry.

Reinsurance Framework in India

Indian Reinsurers (GICRE):

GICRE is the sole Indian reinsurer registered with the regulatory authority
and listed on Indian stock exchanges.
It provides vital support to direct insurers in India, offering them reinsurance
solutions.
GICRE receives obligatory cessions on every policy from domestic general
insurers, ensuring a stable and regulated reinsurance market in the country.

Foreign Reinsurance Branches (FRBs):

The Insurance Law (Amendment) Act, 2015, opened doors for Foreign
Reinsurers and the Society of Lloyd's to establish branches in India.
As of FY23, there were 11 FRBs operating in India.
In FY23, FRBs recorded a Gross Reinsurance Income of USD 2,175 million,
contributing significantly to the reinsurance market in India.
Cross Border Reinsurers (CBRs):

CBRs are insurers with no physical presence in India but engage in

reinsurance business with Indian insurers.
1. As of FY23, 283 CBRs were involved in India's reinsurance business,
showcasing the global reach and participation in the Indian market.

Expanding Market Size: Global Reinsurance Sector

The global reinsurance market is projected to expand from approximately USD

575 billion in 2022 to around USD 895 billion by 2027, indicating significant
growth opportunities within the industry.

Potential for Price Increases:

In January 2023, reinsurance rates experienced a sharp rise, attributed to

factors such as conflicts, high inflation rates, and increased claims from natural
disasters. Given the current environment marked by catastrophic events, there
remains a potential for further price increases in the reinsurance sector.

Expected Benefits to GIC Re from Economic Growth

Robust Indian Economy: Despite global challenges, India's economy remains

resilient, with a GDP growth forecast of 6-6.8% in FY24. This growth is supported
by infrastructure spending, digitalization reforms, and a focus on manufacturing
output.

Insurance Sector Growth: The Indian insurance industry is expected to grow,

driven by the pandemic and geopolitical crisis impacting global business. This
growth presents opportunities for reinsurance companies to expand their
business and increase their market share.

Formalization and Financial Inclusion: The economy benefits from greater

formalization and financial inclusion, leading to increased insurance
penetration. This trend is expected to continue, providing a larger market for
reinsurance companies.

Global Reinsurance Market Growth: The global reinsurance market is forecasted

to expand significantly, presenting opportunities for Indian reinsurance
companies to tap into this growth and expand their international presence.

Infrastructure Spending: The government's focus on infrastructure spending is

expected to have a multiplier effect, boosting investment and manufacturing
activities. This can lead to increased demand for insurance and reinsurance
services.

Resilience to Global Economic Challenges: Despite global uncertainties, India's

resilience and strong macroeconomic fundamentals position it as one of the
fastest-growing economies. This stability benefits the insurance and reinsurance
sectors, providing a conducive environment for growth.

Peer Group Comparison:

Company Name Mar Cap NP 12M Debt/ CMP/BV P/E

Rs.Cr. Rs.Cr. Equity

Life Insurance Corp 614125 40340 0.00 10.04 15.22

SBI Life Insurance 149533 1859 0.00 10.36 80.40

HDFC Life Insurance 133035 1524 0.07 9.38 87.27

ICICI Pru Life Ins 90622 912 0.11 8.18 99.34

ICICI Lombard 82140 1836 0.00 7.02 44.74

New India 37030 931 0.00 1.36 39.81

Assurance

Median 8 86381 1680 0.00 7.6 42.4

Companies

General Insurance 56965 6834 0.00 1.19 8.33

Corp (GICRE)
Mar Cap: GICRE's Mar Cap of Rs. 56,965 crore is lower than the median Mar Cap of
the peer group at Rs. 86,381 crore, indicating a potential to grow.

NP 12M: GICRE's NP of Rs. 6,834 crore is higher than the median NP of the peer
group at Rs. 1,680 crore, suggesting strong profitability.

Debt/Equity: GICRE has a Debt/Equity ratio of 0.00, implying no debt, similar to its
peers, which indicates a healthy financial position.

CMP/BV: GICRE's CMP/BV ratio of 1.19 is significantly lower than the median ratio of
7.6 for the peer group, indicating that the stock may be undervalued relative to its
book value.

P/E: GICRE's P/E ratio of 8.33 is much lower than the median P/E ratio of 42.4 for the
peer group, suggesting that the stock may be undervalued relative to its earnings.

Overall, based on the comparison with its peers, GICRE appears to be

undervalued, as indicated by its lower Mar Cap, higher NP, lower CMP/BV ratio,
and lower P/E ratio. Investors may see this as an opportunity to invest in a
company with strong profitability and a healthy financial position at a
potentially lower valuation compared to its peers.

Key Financial Data:

All figures except EPS are in INR Crore Source: screener.in

Quarterly P&L Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23

Sales 12,923 13,431 11,292 11,537 12,646 12,061 11,275 10,656 11,166 13,075 10,880

Operating Profit -1,715 1,537 -84 3,462 534 2,166 986 3,233 966 1,465 1,348

Other Income Normal 204 33 54 264 491 510 319 -208 187 391 472

Profit Before Tax -1,511 1,570 -30 3,726 1,026 2,676 1,305 3,025 1,154 1,855 1,820

Net Profit -1,040 1,348 142 1,936 729 2,217 1,232 2,729 978 1,689 1,439

EPS -5.93 7.68 0.81 11.04 4.16 12.63 7.02 15.56 5.57 9.63 8.20

Operating Profit: There has been a significant improvement in Operating Profit

over the quarters. It was -84 crore in Dec-21, increased to 986 crore in Dec-22,
and further to 1348 crore in Dec-23, demonstrating a consistent year-on-year
(YoY) growth.

Net Profit: The trend in Net Profit also reflects remarkable growth and
consistency. From 142 crore in Dec-21, it surged to 1232 crore in Dec-22, and
continued to rise to 1439 crore in Dec-23 Qtr, showcasing impressive YoY
growth.
These figures indicate a positive trajectory in the company's financial
performance, with notable increases in both Operating Profit and Net Profit,
highlighting its improved operational efficiency and financial health.

All figures except EPS are in INR Crore

Yearly P&L Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 TTM

Sales 15,338 26,776 38,198 44,928 50,345 48,583 48,967 46,638 45,777

Operating Profit -1,512 -786 -1,702 3,724 -2,100 3,073 3,151 6,929 7,012

Other Income Normal 4,545 4,573 5,351 145 1,754 11 618 1,112 842

Profit Before Tax 3,021 3,770 3,630 3,854 -366 3,069 3,755 8,031 7,854

Net Profit 2,823 3,672 3,146 2,758 -186 1,992 2,386 6,907 6,835

EPS (split adjusted) 3.28 4.27 17.93 15.72 -1.06 11.35 13.60 39.37 38.96

The company experienced a negative operating profit and negative net profit in
the year ending Mar-20, likely due to the adverse effects of the Covid-19
pandemic. However, since then, the company has shown consistent
improvement in its financial performance.

Operating profit has increased from 3,073 crore in Mar-21 to 7,012 crore in the
trailing twelve months (TTM) ending Dec-23. Similarly, net profit has improved
from 1,992 crore in Mar-21 to 6,835 crore in TTM Dec-23. This indicates a
significant turnaround and demonstrates the company's resilience and ability to
recover from the challenges posed by the pandemic.

The current performance of the company is the best ever, with record-breaking
operating and net profits, showcasing strong growth and performance.
All figures are in INR Crore Source: screener.in

Balance Sheet Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Sep-23

Share Capital 430 430 430 439 877 877 877 877 877 877

Reserve 43,742 41,445 19,753 23,716 24,615 23,067 31,586 35,131 44,308 46,897

Borrowing 0 0 0 0 0 0 0 0 0 0

Other Liabilities 30,745 34,228 77,131 88,329 96,716 96,637 107,801 115,833 117,546 125,775

Total Liabilities 74,916 76,103 97,314 112,484 122,209 120,581 140,265 151,841 162,731 173,549

Fixed Assets 181 214 192 200 225 209 200 200 324 318

CWIP 0 0 0 0 0 0 0 0 0 0

Investments 56,758 55,686 66,481 73,791 82,045 70,918 93,990 104,677 114,738 125,665

Other Assets 17,978 20,203 30,641 38,493 39,938 49,455 46,075 46,963 47,669 47,566

Total Assets 74,916 76,103 97,314 112,484 122,209 120,581 140,265 151,841 162,731 173,549

The company has demonstrated a consistent increase in Shareholders' Funds

(Equity + Reserves) since Mar-20, rising from 23,944 crore to 47,774 crore in Sep-
23, representing a remarkable growth of 100%. Additionally, the company has
maintained a zero-debt status.

Fixed assets have also shown growth, increasing from 209 crore in Mar-20 to 318
crore in Sep-23. This indicates an investment in infrastructure to support and
enhance business growth.

Overall, the company's balance sheet is the strongest it has ever been,
reflecting the company's financial strength and stability.

Shareholding Pattern:

Shareholding Pattern Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23

Promoters 85.78% 85.78% 85.78% 85.78% 85.78% 85.78% 85.78% 85.78%

FIIs 0.45% 0.47% 0.46% 0.53% 0.67% 0.77% 0.86% 0.95%

DIIs 10.90% 10.91% 11.07% 11.01% 11.02% 11.02% 11.02% 11.11%

Public 2.87% 2.84% 2.68% 2.67% 2.53% 2.42% 2.34% 2.15%

Source: screener.in All figures are in percentage

The company's shareholding pattern is exceptionally strong, with over 85% owned by
the Government of India, nearly 1% by Foreign Institutional Investors (FIIs), and 11% by
Domestic Institutional Investors (DIIs). This indicates that a total of 98% is held by
strong institutional investors, with only 2% held by retail investors.

This distribution underscores the confidence of major institutions in the business and
their trust in the company's potential and stability.

Technical Chart Analysis:

The stock was listed in Oct-17 and reached a high of 449 on its listing day.
However, during the Covid-19 pandemic, it hit a lifetime low of 85. Since Mar-20,
the stock has been on the rise, coinciding with the improvement in net profit.
A cup with handle pattern has formed, indicating a potential technical target of
583, which is a 79% upside from the current price of 325. Despite this, the stock
recently retraced from 467.80, mainly due to the overall decline in midcap
stocks.

While the long-term target based on the cup with handle pattern is 583, we
anticipate the stock moving towards 441 in the short to medium term, as this
was the recent high on a daily closing basis.

Key Reasons to Consider Buying GICRE Stock:

1. Business Growth Potential: The growth in India's general insurance sector,

driven by overall economic growth, indicates potential business expansion
for GICRE.
2. Regulatory Advantage: As the only regulated reinsurance company in India,
GICRE holds a unique position, supporting 54 direct insurance companies
and possessing extensive sector knowledge.
3. Consistent Quarterly Growth: The company has demonstrated impressive
year-on-year growth in net profit, indicating a strong and improving financial
performance.
4. Record-breaking Net Profit: GICRE has achieved its highest-ever net profit,
showcasing resilience and recovery from pandemic challenges.
5. Undervaluation: With a CMP/BV ratio of 1.19 and a P/E ratio of 8.33, GICRE
appears undervalued compared to its peers, suggesting potential for stock
price appreciation.
6. Debt-free Status: GICRE's zero-debt status indicates a strong financial
position and ability to invest in growth opportunities.
7. Strong Shareholding Pattern: The majority ownership by the Government of
India and strong institutional investors instills confidence in the company's
stability and potential.
8. Technical Analysis: The formation of a cup with handle pattern suggests a
potential upside target of 583, indicating positive momentum in the stock
price.
9. Short to Medium Term Outlook: Despite a recent retracement, the stock is
expected to move towards 441 in the short to medium term, aligning with
previous highs.

These factors collectively indicate a compelling case for considering GICRE

stock as a potential investment opportunity.
Conclusion:
After thorough analysis and considering all the factors mentioned above, we
recommend buying at the current price of 325 with a price target of 441, which
represents a potential upside of 36% in the next 6-12 months timeframe.
-----------------------------------------------------------------------------------------------------
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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS)

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Mr. Vivek Singhal, director of VCPL is also director in following companies:

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2. Vspartans Consultants Pvt Ltd
3. Vspartans Club Pvt Ltd
4. National Education & Information Films Ltd

Mr. Nirmal Kumar Agrawal, director of VCPL is also director in following companies:

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1. Neither Research Analyst nor the Company or his associates or relatives have any
financial interest in the subject Company;
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actual/beneficial ownership of one per cent or more securities of the subject company, at
the end of the month immediately preceding the date of publication of the research
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Definition of Ratings

Ratings Expected Absolute Returns over 12-

18 Months

Buy More Than 10%

Hold Between 10% and -10%

Sell Less than -10%

Not Rated We have forward looking estimates

for the stock but we refrain from
assigning valuation and
recommendation

Under Review We will revisit our recommendation,

valuation and estimates on the stock
following recent events

No Stance We do not have any forward-looking

estimates, valuation or
recommendation for the stock

Other Disclosures

Name of the compliance officer– MRS. NISHI SINGHAL

Telephone no. / Mobile no. +91 9881493166

Email id - nishi@vspartans.in

Name of the Grievances officer- CA. AASTHA AGRAWAL

Telephone no. / Mobile no. +91 9371193166

Email id - aastha@vspartans.in

ANALYST CERTIFICATION: I, Nirmal Agrawal (B.COM, FCA) Research Analyst author and the
name subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect my views about the subject security. I/ also certify that no part of
my compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report

Please send your feedback to nirmal@vspartans.in or vivek@vspartans.in

ANALYST

Nirmal Agrawal nirmal@vspartans.in +91 9881493166

(Sources: Charts and Financial Data from Screener.in and Tradingview.com)