Star Health IPO opens on November 30: 10 key things to know before subscribing public issue

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#IPO - New, #Star Health and Allied Insurance Company, #Star Health IPO

Star Health IPO

Rakesh Jhunjhunwala backed Star Health & Allied Insurance Company incorporated in 2006, will launch its maiden IPO in the coming week. It is one of the largest private health insurers in India with a market share of 15.8 percent in Fiscal 2021.

Here are 10 key things to know before subscribing to the public issue:

1) IPO Dates

The offer will open for subscription on November 30 and the last date for subscribing to the offer is set for December 02, 2021.

2) Price Band

The price band for the offer of Safecrop Investments India, Westbridge and ace investor Rakesh Jhunjhunwala-promoted company has been fixed at Rs 870-900 per share.

3) Offer Details

Star Health aims to mobilize Rs 7,249.18 through this IPO that comprises fresh issuance of shares worth Rs 2,000 crore and an offer for sale (OFS) of 5.83 crore equity shares by several shareholders.

Through the OFS, promotor Safecrop Investments India LLP will be offloading 3.07 crore shares. Promoter groups Konark Trust and MMPL Trust will be diluting 1.38 Lac Shares and 9.5K shares respectively.

Among other shareholders, APIS Growth 6 will sell 76,80,371 equity shares, MIO IV Star & MIO Star will offload 41,10,652 equity shares each, and University of Notre Dame DU LAC is going to sell 74,38,564 equity shares through OFS.

Further, ROC Capital Pty Limited will sell 25,09,099 equity shares, Venkatasamy Jagannathan 10 lakh equity shares, Sai Satish 5 lakh shares, and Berjis Minoo Desai will offload 1.44 lakh equity shares.

The offer includes a reservation of shares worth Rs 100 crore for the company’s employees. The anchor book, if any, may open for a day on November 29, a day before the opening of the IPO.

4) Objectives of Issue

Star Health is going to utilize net proceeds from fresh issues towards augmentation of its capital base and maintenance of solvency levels.

5) Lot Size and Investor’s Reserved Portion

Investors can bid for a minimum of 16 equity shares and in multiples of 16 shares thereafter. Retail investors can invest a minimum of Rs 14,400 for a single lot, and their maximum investment would be Rs 1,87,200 for 13 lots (208 equity shares).

6) Company Profile and Industry

Star Health with a market share of 15.8 percent is the largest private health insurer in the Indian health insurance market, as per a report from CRISIL Research. In FY21 and first half of FY22, it had total gross written premium (GWP) of Rs 9,348.95 crore and Rs 5,069.78 crore, respectively.

The company offers a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel. The retail health and group health accounted for 87.9 percent and 10.5 percent of its total GWP in FY21.

The retail health insurance will be a key growth driver for the health insurance industry in India especially after the COVID pandemic. The penetration of health insurance in India is still one of the lowest in the world and only 10 percent of the population has insurance policies outside of government plans. Also, higher health care costs will push people to go for health insurance going forward.

7) Financials

The company’s performance has been severely impacted by COVID-19 which has resulted into higher claims and deterioration of the solvency ratio for the company.

COVID related insurance claims almost doubled compared to the non COVID claims. Of the net paid claims for the company, 30 percent of the claims were due to the pandemic which increased further to 41 percent as the severity of pandemic increased with the second wave.

Consequently, the net incurred claims ratio increased from 64.2 percent and 65.8 percent in FY19 and FY20, respectively to 87 percent in FY21. For H1 FY22, this ratio stood at 88.2 percent as compared to 60.3 percent in H1 FY21.

Covid-19 pandemic was one of the key reasons for the company reporting an operating loss of Rs 1,071.2cr in FY21 as compared to a profit of Rs. 360.8cr in FY20. Its solvency ratio declined from 2.2x in FY21 to 1.52x in H1 FY21, (as against the regulatory requirement of 1.5x).

8) Key Risks

Any unfavorable change in the government policies and regulations can have an adverse impact on the company’s performance.

The company and industry as such continue to face risk from the Covid-19 pandemic and any further resurgence of cases in the country will bring more harm to the sector and the company may find it difficult to maintain the profitability.

“Unfavorable movement in the interest rates, stiff competition from other players and inability to manage hospital network and distribution channels”, are also few major risks faced by the company as per the brokerage firm, Choice Broking.

9) Promoters & Management

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

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

Post-IPO the promoter shareholding will come down to 58.30 percent while the public holding will increase from current 33.78-41.70 percent.

Management of the company

Venkatasamy Jagannathan is the Chairman and CEO of the company and has previously worked with United India Insurance Company in the capacity of chairman cum managing director.

Subbarayan Prakash is the Managing Director of the company. He has several years of experience as a surgeon in general surgery/traumatology.

Anand Shankar Roy is the Managing Director of the company and has previously worked with American Express Travel Related Services and ICICI Lombard General Insurance Co Ltd.

Sumir Chadha, Deepak Ramineedi and Utpal Hemendra Sheth are the Non-Executive Nominee Directors of the company.

Rohit Bhasin, Anisha Motwani, Berjis Minoo Desai, Kaarthikeyan Devarayapuram Ramasamy, Rajni Sekhri Sibal and Rajeev Krishna Murari Lal Agarwal are the Independent Directors of the company.

Key Managerial Personnel

Nilesh Kambli is the CFO of the company and has previously worked with Bharti AXA General Insurance Co Ltd, Citicorp Finance (I) Ltd and ICICI Lombard General Insurance Co Ltd. He joined the company as the CFO in 2020.

Aneesh Srivastava is the Chief Investment Officer of the company. He has previously worked with Bajaj Allianz Life Insurance Co Ltd, IDBI Fortis Life Insurance Co Ltd, India Advisory Partners Pvt Ltd and Sahara India.

Jayashree Sethuraman is the Company Secretary and Compliance Officer of the company.

10) GMP, Listing & Allotment Date

The grey market premium for the IPO is currently at Rs 10 per share as per IPO watch.

The share allotment will get finalised by December 7, 2021 and the unsuccessful investors will get refunds in their bank accounts by December 8 while successful investors will get shares in their demat accounts by December 9.

The trading in equity shares on the BSE and NSE will commence with effect from December 10.

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