The public issue of Star Health and Allied Insurance Company continued to see muted response from investors as the offer received bids for 1.66 crore equity shares against an issue size of 4.49 crore, subscribing 37 percent on the final day of bidding on December 2. The offer was opened for subscription on November 30.
The reserved portion of qualified institutional buyers was subscribed 32 percent and that of non-institutional investors saw 10 percent subscription.
Retail investors remained at the forefront as the portion set aside for them was booked 98 percent, while employees have bought 6 percent shares of their reserved portion.
Till the second day of bidding, the third biggest IPO of 2021 was subscribed 20 percent.
Star Health, the largest private health insurance company and the largest retail health insurance company in India by gross written premium (GWP), intends to mop up Rs 7,249 crore through the public issue at the higher end of the price band of Rs 870-900 per share. The issue comprises fresh issuance of shares worth Rs 2,000 crore and an offer-for-sale of Rs 5,249 crore by selling shareholders.
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“In terms of valuations, on the higher price band, Star Health demands a market cap/GWP multiple of 5.5x based on FY21 GWP,” said Ashika Stock Broking.
“The company intends to enhance its market leadership by leveraging its strong brand. It aims to enhance existing distribution channels and develop alternative channels. It also intends to focus on product innovation and provide value-added services, along with utilisation of digitisation in business to improve operational efficiencies and customer service,” the brokerage said.
Accordingly, it has recommended to subscribe the issue from the long term perspective.
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The Indian health insurance market continues to be underpenetrated, with a health insurance penetration of only 0.36 percent of GDP in 2019, compared to the global average of 2 percent of GDP.
The retail health segment in India is expected to emerge as a key growth driver for the overall health insurance market due to its lower claims ratio of 73 percent, as compared to government health and group health with claims ratios of 92 percent and 99 percent, respectively, in FY20, making the retail health segment more attractive from a profitability perspective, since lower claims results in higher profitability, said Ashika Stock Broking.
Star Health’s size and established market share positions it well to continue to capitalise on these market dynamics in the retail health insurance sector, the brokerage said.
The company enjoyed a 15.8 percent overall health insurance market share and a 31.3 percent retail health insurance market share in FY21.
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