Industry |
Price Band |
Recommendation |
Health Insurance |
870-900 |
Avoid |
Star Health and Allied Insurance is the largest private health insurer in India with a 15.8% market share in the Indian health insurance market in FY21. It started in 2006 as the first insurance company dedicated to health insurance and it is now the largest health insurance provider, according to a report by CRISIL. In FY21 the company had total Gross Written Premiums (GWP) of Rs 9,348.95 crore and in the H1 of FY22, it had Rs 5,069.78 crore as GWP. The company provides a varied range of health insurance products catering to individuals and groups. It also serves persons with pre-existing medical conditions. The insurance products are primarily distributed through insurance agents and it currently has 5.1 lakh insurance agents as of September 30, 2021. The company has built one of the largest health insurance hospital networks in India, with 11,778 hospitals by the end of H1 FY22. The company has invested in digital technologies, data platforms, and automation. These are expected to be the key drivers for business growth.
Subscription Dates |
30th Nov – 2nd Dec 2021 |
Price Band |
Rs 870 - Rs 900 |
Issue Size |
Rs.7,249 crores |
|
5,83,4,225 shares |
Lot Size |
16 Shares |
Minimum bid |
16 Shares |
Face Value |
Rs.10 Per Share |
Listing On |
BSE, NSE |
Allocation |
100% |
Retail Allocation |
10% |
QIB |
75% |
Non-Institutional |
15% |
Promoters |
Safecrop Investments India LLP |
Rakesh Jhunjhunwala |
WestBridge AIF I |
Book Running Lead Managers |
Kotak Mahindra Capital Co. Ltd |
Axis Capital Ltd |
BofA Securities India Ltd |
Citigroup Global Markets India Private Ltd |
ICICI Securities Ltd |
CLSA India Private Limited |
Credit Suisse Securities (India) Private Ltd |
Jefferies India Private Ltd |
Ambit Private Ltd |
DAM Capital Advisors Limited |
IIFL Securities Ltd |
SBI Capital Markets Ltd |
Registrar to the Offer |
KFin Technologies Private Ltd |
Particulars (Rs Crores) |
FY19 |
FY20 |
FY21 |
Gross Written Premium |
5,415.36 |
6,890.67 |
9,348.95 |
EBITDA as stated |
235.94 |
468.47 |
(974.62) |
Profit Before Tax |
182.25 |
413.43 |
(1,045.95) |
Net Profit |
128.23 |
268 |
(825.58) |
EPS - Basic |
2.81 |
5.59 |
(16.54) |
Net worth |
1215.69 |
1628.68 |
3484.64 |
NAV/share (Rs) |
19.0 |
33.2 |
63.58 |
P/E |
6.76 |
5.94 |
- |
*P/E is calculated using NAV/share
The Indian health insurance market is still underpenetrated, as this segment is still 0.36% of GDP in 2019, compared to the global average of 2.0% of GDP. Demographic factors like life expectancy increase, per capita GDP, population growth, and increasing health expenditure are key drivers for the growth of the health insurance market in India. The Government of India’s measures to increase the reach of insurance to the mass segment and the rising cost of medical care in private hospitals resulted in an increase in the demand for health insurance. The overall health insurance segment grew 13%, with the general insurers witnessing a growth rate of 8% and standalone health insurers witnessing a 28% growth rate in FY21.
The standalone health insurers’ growth rate is much faster than other players in the retail health insurance segment. The key growth drivers of this industry are Government policies to improve healthcare coverage, increasing life expectancy, rising income levels, advancements in medical diagnosis and treatments, and increasing product portfolio.
Star Health and Allied Insurance Company Ltd is the largest private health insurance company in India with a 15.8% overall health insurance market share. It is also a leader in the attractive retail health segment with a 31.3% market share in FY21. The Company’s health GWP was over three times the GWP of the 2nd highest retail health insurance company. The company has one of the largest and widespread distribution networks in the industry. It also has an integrated ecosystem that is believed to increase its access to the growing health insurance segment. It has the largest number of agents among standalone health insurers. The number of agents grew at a CAGR of 27.3% in the years 2019 to 2021, and as of Sept 30, 2021, it had 5.1 lakh insurance agents. The company has a diversified and innovative product portfolio.
This is the third-largest IPO in terms of issue size in 2021 after One 97 Communications and Zomato. The company suffered a setback in the last 18 months and on the basis of its negative earnings, the IPO seems to be priced aggressively. The P/E ratio cannot be calculated because of its negative EPS in FY21. The 10% quota for retail investors seems to be lucrative, but one should be cautious while applying for this IPO. We believe that the company may not make listing gains because the Institutional investors are given a high percentage of the issue size and those who are interested to make an investment in this company will be applying through the IPO and there may not be an increase in the price after its listing. The grey market premium is considered to be a measure of listing gains by the retail investors and the GMP of Star Health and Allied Insurance Company recently took a hit from Rs 70 to Rs 10, as per market observers.
The company in its DRHP has shown ICICI Lombard and New India Assurance as its listed peers. The companies are currently trading at P/E ratios of 48.42 and 14.9 (as of November 29, 2021). However, they are not truly comparable on an apple to apple basis.
DISCLAIMER |
This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.