Star Health's Rs 72.5 bn IPO to Open on 30 November. Key Points to Consider

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
Top Ad

Find Out

How to Find One Stock with Crorepati Potential? >> READ MORE

  • Home
  • Views On News
  • Nov 24, 2021 - Star Health's Rs 72.5 bn IPO to Open on 30 November. Key Points to Consider

Star Health's Rs 72.5 bn IPO to Open on 30 November. Key Points to Consider

Nov 24, 2021

Star Health's Rs 72.5 bn IPO to Open on 30 November. Key Points to Consider

Health insurance company Star Health and Allied Insurance, which is backed by marquee investors like Safecrop Investments India, Westbridge, and Rakesh Jhunjhunwala is all set to open its initial public offering (IPO) next week.

The public issue will open for subscription on 30 November 2021 and it will close on 2 December 2021. The anchor book, if any, may open for investors for a day on 29 November, a day before the issue opening.

The insurance company has fixed a price band of Rs 870-900 a share for its Rs 72.5 bn public offer.

Star health IPO would be the third-largest IPO in 2021 after Paytm and Zomato, which raised Rs 183 bn and Rs 93.8 bn, respectively.

Star Health and Allied Insurance is the country's first standalone insurance provider. The company extends health, overseas travel, and personal accident insurance policies.

Star Health and Allied Insurance IPO Details

Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price Rs 870 to Rs 900 per equity share
Market Lot 1 lot - 16 shares
Issue Size Rs 72.5 bn
Fresh Issue Rs 20 bn
Offer for Sale Rs 52.5 bn
Basis of Allotment Date Tuesday, December 7, 2021
IPO Listing Date Friday, December 10, 2021
Data Source: Company's Red Herring Prospectus (RHP)

Promoter's stake in the company

Promoter and promoter group, including Rakesh Jhunjhunwala, Safecrop Investments India LLP, and WestBridge AIF I, currently hold 66.22% stake in the company and the remaining 33.78% shareholding is held by public shareholders.

Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala own 18.21% stake in the company, while Safecrop Investments India LLP is the major shareholder with 47.77% stake.

Safecrop Investments India will offload 30.1 million equity shares via offer for sale (OFS), and Konark Trust & MMPL Trust, which are part of promoter group, will sell 1.4 lakh equity shares and 9,518 shares, respectively via OFS.

Category-wise reserved portion

The public offer includes a reservation of shares worth Rs 1 bn for employees.

About 75% of the issue size has been reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors, and the remaining 10% for retail investors.

Use of IPO funds

The net proceeds from fresh issue will be utilised towards augmentation of company's capital base and maintenance of solvency levels.

A bit about Star Health and Allied Insurance

Incorporated in 2006, Star Health and Allied Insurance Company is one of the largest private health insurers in India with a market share of 15.8% 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%, 10.5%, 1.6%, and 0.01%, respectively, of the total gross written premium (GWP) in fiscal 2021.

Company's distribution network

The company mainly distributes policies through individual agents and also includes corporate agent banks and other corporate agents.

As of 31 March 2021, its network distribution includes 737 health insurance branches across 26 states and 4 union territories in India.

Star Health has also built one of the largest health insurance hospital networks in India with more than 10,870 hospitals.

The company occupies 30% market share in the retail health insurance sector. Between the period of April 2020 and November 2020, the company sold nearly 4.3 million insurance policies.

Financial snapshot of the company

Star Health posted a loss of Rs 8.3 bn in the financial year 2021, against profit of Rs 2.7 bn in previous year.

In the six months period ended September 2021, loss stood at Rs 3.8 bn against profit of Rs 2 bn in the same period previous fiscal.

Key Parameters

(Rs m) FY19 FY20 FY21
Total Income 2,262.5 4,619.6 -9,077.8
Growth (%)   104%  
Expenses 440.1 485.4 1,381.7
Net Profit\Loss 1,282.3 2,680 -8,256
Data Source: Company's RHP

In the financial year 2021, the combined ratio of the company increased to 114.8% primarily due to certain exceptional accounting adjustments primarily related to withdrawal from a reinsurance treaty in the fiscal 2021, and the exceptional impact of the Covid-19 crisis, the company said in its prospectus.

For more details, check out Star Health and Allied Insurance's Red Herring Prospectus.

Market peers

Star Health Insurance company is a market leader in the insurance space. Regardless, the company has more than one market peer with a strong market presence.

The proposed IPO will make Star Health the fourth private sector insurance provider to list on Indian stock exchanges, following HDFC Life Insurance, ICICI Prudential Life Insurance, and ICICI Lombard General Insurance.

Company (Rs bn) Total Income Net Profit\Loss Return on Net Worth (%)
HDFC Life Insurance 17 14 12.2%
ICICI Prudential Life Insurance 28 10 7.9%
ICICI Lombard General Insurance 25 15 18.2%
Star Health and Allied Insurance -9 -8 -23.7%
Data Source: Company's RHP and Equitymaster

Health Care in the retail sector

For the past three fiscal years, they have consistently ranked first in India's retail health insurance business based on retail health GWP.

Following the Covid-19 emergency, the retail health market segment is expected to emerge as a significant growth driver for the entire health insurance sector in India, owing to low health insurance penetration, high out-of-pocket healthcare costs, and the fact that only 10% of the population has insurance policies other than government plans.

In Fiscal 2021, their retail health GWP was more than three times that of the second-largest retail health insurance market competitor, placing the company in an excellent position to help them continue to grow.

Star Health's grey market premium

As per market observers, Star Health shares are available at a premium of Rs 130 in the grey market today.

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganised market.

IPO market is booming in India. Will the trend continue?

The Indian stock market is still currently trading high and IPOs are attracting some wild valuations.

Given the abundant liquidity, the market regulator easing listing procedures and overall bullish sentiments, the IPO craze is understandable.

Data suggests that companies raised funds to the tune of US$4.6 bn from IPOs last year. The market believes this amount will be easily surpassed in 2021.

As companies line up to raise funds from the market amid high valuations, investors need to consider many factors before investing their money in an IPO.

If you are investing in an IPO, weigh in all the positive and negative factors affecting the company.

Take a close look at the company's financials and valuations. It would give you a clear picture of what's brewing.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more here...

Equitymaster requests your view! Post a comment on "Star Health's Rs 72.5 bn IPO to Open on 30 November. Key Points to Consider". Click here!

  

More Views on News

5 Penny Stocks with Good Dividend Yields (Views On News)

Jun 25, 2022

These penny stocks are helping investors get stable returns in a volatile market.

Why Crude Oil Price is Falling (Views On News)

Jun 25, 2022

Global markets have become volatile, sending chills through the crude oil market.

Tata Group Stocks: Biggest Gainers and Losers so far in 2022 (Views On News)

Jun 22, 2022

Here's how Tata Group stocks have performed amid the volatility in the market.

To Move or Not to Move into Cash Right Now? podcast (Views On News)

Jun 25, 2022

Rahul Shah on whether one should move significantly into cash right now.

Will the Stock Market Recovery Continue? (Views On News)

Jun 25, 2022

The stock market has bounced back a little bit. Can it sustain the nascent momentum?

More Views on News

Most Popular

A Complete Guide For Beginners On How To Invest In Ipos

As an investor, you must have endeavoured to find a suitable opportunity for investing in IPOs. But do you know what is an IP...

4 Sectors to Watch for Future Multibagger Stocks (Views On News)

Jun 17, 2022

With India's economic recovery accelerating, these sectors are likely to give multibagger returns in the future.

Why Tata Power Share Price is Falling (Views On News)

Jun 14, 2022

Here's why shares of Tata Power have fallen in recent days.

Is it Time to Start Buying Stocks Selectively? (Profit Hunter)

Jun 16, 2022

Some sectors have corrected by 50%. Do they merit a look?

Best Monopoly Stocks to Own in 2022 Views On News (Views On News)

Jun 18, 2022

Constant product innovation, latest technology, strong supply chain etc can all help companies enjoy monopoly like fortunes.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Jun 24, 2022 (Close)

MARKET STATS