Star Health and Allied Insurance Company’s initial public offering (IPO) will be closed on Thursday, December 2. Investors have the last chance to book the maiden offer. Backed by veteran investor Rakesh Jhunjhunwala, Star Health and Allied Insurance is India’s first pure-play health insurance company. The company has fixed the price band at Rs 870 – 900 per share. Star Health IPO comprised of fresh issue of Rs 2,000 crore and offer for sale (OFS) of equity worth Rs 5,249 crore (5.8 crore shares) by promoters and existing shareholders. Interested investors can bid in multiples of 16 units. The company will not receive any proceeds from the OFS part of the issue. The net proceeds of the Star Health and Allied Insurance Company IPO will be used to augment the capital base, thereby maintaining the solvency levels of the company.
Star Health and Allied Insurance Company IPO Valuation and Subscription Status
The IPO is valued at 14.9x FY21 book value, which looks to be at a significant
premium compared to ICICI Lombard and New India Assurance, which among
the listed space have got presence in the health insurance business. So, most of the brokerage houses recommended to subscribe Star Health IPO with caution and for long term gain.
Star Health IPO was subscribed 20 per cent on the second day of bidding, backed by the retail investors. Majority of the bids have come from retail investors, who have only a 10 per cent quota in the IPO as against 35 per cent. The company earlier said it had raised a little over ₹3,217 crore from anchor investors ahead of its IPO.
Star Health and Allied Insurance IPO Grey Market Premium:
The grey market premium of Star Health was quoted at Rs 15 on December 2, according to IPO Watch. The unlisted shares of Star Health and Allied Insurance was trading at Rs 150 on November 24 in the grey market. However, the Star Health and Allied Insurance IPO GMP dropped significantly in the last one week.
Star Health and Allied Insurance IPO: Company Profile
Incorporated in 2006, Star Health and Allied Insurance Company Ltd (Star Health) is one of the largest private health insurers in India with a market share of 15.8 per cent in Fiscal 2021. The company primarily focuses on the retail health market segment. It offers a range of flexible and comprehensive coverage options for retail health, group health, personal accident, and overseas travel, accounting for 87.9 per cent, 10.5 per cent, 1.6 per cent, and 0.01 per cent, respectively, of the total Gross Written Premium (GWP) in Fiscal 2021. As of September 30, 2021, its network distribution includes 779 health insurance branches across 25 states and 5 union territories in India. Star Health has also built one of the largest health insurance hospital networks in India with more than 11,778 hospitals.
Star Health and Allied Insurance IPO: Should you Subscribe?
“Due to the covid pandemic, the awareness in health insurance sector has increased and the retail health market segment is expected to emerge as a key growth driver for the overall health insurance industry in India. Health Insurance sector has a strong positive outlook and since there are only two listed general insurance companies in India, ICICI Lombard and New India Insurance, we expect Star Health is a good option to invest for long term,” said Ravi Singh, head of research and vice president at ShareIndia.
“Star Health stands out among other standalone health insurers (SAHI) in terms of size, strong growth rates (32% Gross Written Premium CAGR over FY18-21) and better operational performance which is reflected in pre-Covid numbers for the company ( 93 per cent combined ratio). The valuations commanded by Star Health at 5.5x FY21 Mcap/GWP, are in-line with recent deals in the SAHI space and appears fair considering its positioning. Hence, we recommend subscribe from a long-term perspective only,” said Amarjeet Maurya – AVP – mid caps, Angel One Ltd.
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