Motilal Oswal Sees 51% Upside in New Life Insurer Listing
Overview
Brokerage firm Motilal Oswal initiated coverage on Canara HSBC Life Insurance with a 'Buy' rating, projecting a 51% upside for its bull case target of ₹220 by FY28. The report highlights the insurer's strong product mix, bancassurance-led distribution, and significant growth runway among Canara Bank's 120 million customers. The analysis comes as the company's three-month shareholder lock-in expired, making 4% of its equity tradable.
Stocks Mentioned
Brokerage firm Motilal Oswal has initiated coverage on the newly listed Canara HSBC Life Insurance, issuing a 'Buy' rating and setting a price target that suggests a substantial upside for investors. The firm's bull case scenario projects a potential gain of 51% from Monday's closing levels, with a target of ₹220 per share by financial year 2028. This initial assessment was released in a note on Tuesday, January 13.
Growth Prospects and Distribution Strength
Motilal Oswal highlighted Canara HSBC Life Insurance as one of India's top ten life insurers, boasting a well-diversified product portfolio. In the first half of fiscal year 2026 (H1FY26), Unit Linked Insurance Plans (ULIPs) constituted 50% of its business, followed by non-participating products (34%), and participating and protection products (8% each). The company heavily relies on bancassurance for distribution, with Canara Bank channeling 70% of its business and HSBC contributing 15% during the period.
The insurer has a decade-long track record of outperforming the broader industry and the private-sector segment, achieving a 22% compound annual growth rate (CAGR) in annualised premium equivalent (APE). This growth has led to an expansion of its market share by 90 basis points overall and 110 basis points within the private segment.
Industry Tailwinds and Company Strategy
The life insurance industry in India is poised for sustained growth, driven by increasing penetration, favourable GST exemption, a significant protection gap, and potential regulatory enhancements such as risk-based solvency norms and composite licenses, according to Motilal Oswal. Against this backdrop, Canara HSBC Life Insurance is expected to continue its market share gains. This growth is anticipated through deeper penetration among Canara Bank's extensive customer base of 120 million individuals, enhanced cross-selling via the HSBC channel, expansion of its agency network, and new distributor partnerships.
Motilal Oswal pointed out the considerable untapped potential within Canara Bank's customer base, noting that Canara HSBC Life Insurance currently serves just 1.7% of these customers. Branch productivity also stands at ₹1.6 million, significantly lower than the over ₹5 million seen in other private banks, indicating room for improvement. With Canara Bank investing more in digital tools for customer segmentation, the brokerage foresees a robust growth trajectory for the insurer.
Financial Projections and Lock-in Expiry
Motilal Oswal forecasts Canara HSBC Life Insurance to achieve a 20% CAGR in APE and a 23% CAGR in value of new business (VNB) from FY25 to FY28. VNB margins are projected to increase by approximately 50 basis points annually over the next few years, supported by a favourable product mix and economies of scale. These gains may be partially offset by investments in developing the agency channel.
In a separate development, the three-month shareholder lock-in period for Canara HSBC Life Insurance concluded on Tuesday. This has made approximately 35.4 million shares, representing about 4% of the company's outstanding equity, available for trading. These shares are valued at approximately ₹521 crore. Canara HSBC Life Insurance shares fell 5% on Tuesday, though they remain nearly 40% above their initial public offering price of ₹106.
