Is SBI Life a Good Buy After FDI Cap Lifted in Insurance Cos?

The government announced in the Budget that it is lifting FDI (foreign direct investment) cap for the insurance sector. FDI in insurance will now be allowed at 74%, from 49%. This is bound to attract a lot of foreign players and capital into this sector.

Only 2.44% of India is actually insured. The potential for growth in this sector is immense. The decision to sell off (privatize) one state insurer means the interest in this space will only keep rising. SBI (NS:SBI) Life Insurance Company Ltd (NS:SBIL) is one of the largest players in the sector. It has a good piece of the market and the ensuing interest here will drive growth.

The stock has closed at Rs 867.3 today. Multiple brokerage firms have given the stock a ‘buy’ recommendation. IIFL has given it a price target of Rs 925, an upside of around 6.7%. Yes Securities is even more bullish on the stock and has given it a target of Rs 1,137, an upside of over 31% from current levels.

The rationale behind their target is that SBI Life is the lowest cost operator in this space and it has better growth than ICICI Prudential (LON:PRU) Life Insurance Company Ltd (NS:ICIR) that is trading at a higher valuation than SBI Life.

Source: Investing.com