Star Health and Allied Insurance Company Ltd incorporated on June 17, 2005, is one of the largest private health insurers in India with a market share of 15.8% in Fiscal 2021. In Fiscal 2021 and the 6 months ended September 30, 2021, they had total Gross Written Premium (“GWP”) of Rs. 9,348.95 crore and Rs. 5,069.78 crore, respectively. They offer a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel. Their comprehensive health insurance product suite insured 20.5 million lives in Fiscal 2021.
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They have successfully built one of the largest health insurance hospital networks in India, with more than 11,778 hospitals as of September 30, 2021. Out of the total number of hospitals in their network, they have entered into pre-agreed arrangements with over 7,741 hospitals, or 65.7%, of the total number of hospitals in their network. As of September 30, 2021 their distribution network had grown to 779 health insurance branches spread across 25 states and 5 union territories in India. Star Health distributes their health insurance policies primarily through individual agents, which accounted for 78.9% of their GWP in Fiscal 2021. They also engage with their customers through their in-house telemedicine service, TALK TO STAR, including Omni-channel applications, STAR ATOM and STAR POWER.
Promoters & Shareholding:
Safecrop Investments India LLP, Westbridge AIF I and Rakesh Jhunjhunwala are the company promoters.
|Pre Issue Share Holding||66.22%|
|Post Issue Share Holding||58.42%|
Public Issue Details :
Offer for sale: Fresh issue of approx. 22,222,222 equity shares of Rs. 10 aggregating up to Rs. 2,000 Cr and OFS of approx. 58,324,225 equity shares aggregating up to Rs. 5,249.18 Cr.
Total IPO Size : Rs. 7,249.18 Cr.
Price band: Rs. 870 – Rs. 900.
Objective: To utilize the net proceed to augment the company’s capital base and insolvency level.
Bid qty: minimum of 16 shares (1 lot) for Rs. 14,400 and maximum of 13 lots.
Offer period: 30 th Nov 2021 – 2 nd Dec 2021.
Date of listing: 10 th Dec 2021.
- The largest private health insurance company in India with leadership in the attractive retail health segment.
- One of the largest and well spread distribution networks.
- Professional and experienced management team.
- Strong risk management focus with domain expertise driving a superior claims ratio and quality customer service.
- Offers a range of flexible and comprehensive coverage options.
- The company has incurred losses in Fiscal 2021 and the six months ended September 30, 2021.
- COVID-19, and other catastrophic events, such as natural disasters could materially increase its liabilities for claims by policyholders.
- As a significant portion of its business is generated from the retail health insurance sector, it is susceptible to any adverse trends which may affect its business.
- Exposed to credit risks in relation to its investments.
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Subscribe or avoid?
Sectorial outlook – The global health insurance market is estimated to be around $1.5 trillion in 2019 but in India this sector remains largely underpenetrated when compared to other developed nations. From Fiscal 2002 to Fiscal 2021, the health insurance premium in India has increased 86 times. Health insurance premiums have grown at a CAGR of 19% in the last 6 years ending Fiscal 2021 and it is expected to grow at approximately 18% CAGR over the next four years. Consequently, the total premium is expected to grow by approximately two times from Rs. 583 billion (as of Fiscal 2020) to close to Rs. 1,150 billion by Fiscal 2025. The health insurance industry is mainly driven by rise in health expenses and increase in prevalence of chronic diseases. The out-of-pocket expenditure on healthcare in India is nearly 63% of total health expenditure and this along with increasing household income, the pandemic and increasing digitalization is expected have positive impact on the company and its business.
The financials (revenue and net profit) are shown in graph below:
Valuation – For the last 3 years average EPS is Rs. 0.91 and the P/E is around 989x on the upper price band of Rs 900. Since the EPS is negative for FY21 getting a comparable PE with its peers would not be possible.
Conclusion – The losses in FY21 could be due to the pandemic and therefore if these losses can be considered as a one-off event, then it makes a case for aggressive investors with cash surplus and high-risk appetite to subscribe. Also please note that there might not be any meaningful listing gains as the Grey Market Premium is only around Rs. 15.
Please Note: If you are a conservative investor, you better avoid this issue for now and wait for an appropriate opportunity to enter
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Also read : Market Outlook – Nov’21