Shares of Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Co Ltd on Friday managed to close near its initial public offering (IPO) price after opening discount.
The stock opened at Rs 848.80 on BSE, down 5.8% from its issue price of Rs 900 a share. It touched a high and a low of Rs 940 and Rs 827.50 respectively. At closing, the scrip settled at Rs 906.85 on BSE, up 0.76% from its issue price.
"We believe Star will continue to grow at a faster pace than industry. However, we find valuations at an expensive end from a near term perspective, not leaving much upside on the table. In addition, hospitalisation of non-covid cases could be a negative surprise in forthcoming months" said Aditya Birla Capital in a note to its investors.
Due to poor response in the IPO, the firm had cut its offer for sale size to Rs 4,400 crore from ₹5,249.18 crore. The fresh issue size has been kept unchanged at Rs 2000 crore.
Last week, retail investors placed bids for only 1.08 times the shares reserved for them. Non-institutional investors bid for 0.18 times of their quota while institutional investors subscribed 1.03 times.
The total IPO size will now be ₹6,400 crore instead of ₹7,249 crore.
Safecrop Investments India LLP sold 29.85 million shares and not 30.68 million shares earlier planned. Apis Growth 6 Ltd sold 4.34 million shares versus 7.68 million earlier, Mio IV Star sold 3.83 million shares (cut from 4.11 million shares earlier), University of Notre Dame DU LAC sold 5.63 million shares (7.44 million earlier), Mio Star sold 2.49 million shares (4.11 million earlier), and ROC Capital sold 1.4 million shares (2.51 million earlier).
The listing made Star Health the fourth private sector insurance provider to list on Indian stock exchanges, following HDFC Life Insurance Co. Ltd, ICICI Prudential Life Insurance and ICICI Lombard General Insurance. Other listed insurance companies include SBI Life Insurance and state-owned The General Insurance Co. of India and New India Assurance Co. Ltd.
The company is the largest private health insurer in India with a market share of 15.8% in the Indian health insurance market in Fiscal 2021. As of fiscal year 2021, it had a total Gross Written Premium (GWP) of Rs 93.49 billion.
It offers a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel, which accounted for 87.9%, 10.5%, 1.6% and 0.01%, respectively, of its total GWP in Fiscal 2021. For FY21, it issued 7 million health insurance policies. Since inception till date, it has processed approximately 6 million claims.
It has successfully built one of the largest health insurance hospital networks in India, with more than 10,870 hospitals. Out of the total number of hospitals in its network, it has entered into pre-agreed arrangements with over 7,000 hospitals, or 64.9%, of the total number of hospitals in its network as of FY21, and it processed 0.33 million claims, or 55.0% of its total number of cashless claims, through our agreed network hospitals. It has over 12,800 employees and over 640 branch offices across India.
For FY21 its total income stood at Rs 7405.32 crore against Rs 5453.78 crore a year ago. Net loss for the period stood at Rs 825.58 crore versus Rs 268 crore a year ago.
The company said it has seen a significant increase in claims across its network, in particular most recently during the resurgence in COVID-19 cases in April and May of 2021, which it expects may have an impact on its net Incurred Claims Ratio and our solvency ratio for Fiscal 2022.
The firm settled and paid 0.15 million claims related to COVID-19 amounting to gross paid claims of Rs1528.64 crore as of March 2021. Outstanding COVID 19 claims amounted to Rs110.35 crore. Overall gross incurred claims amounted to Rs1638.98 crore on account of COVID-19 and net incurred claims after reinsurance amounted to Rs1206.06 crore.