Chennai-based Star Health and Allied Insurance Co Ltd, backed by private equity firm WestBridge and ace investor Rakesh Jhunjhunwala among others, has filed draft papers with the market regulator Securities and Exchange Board of India (SEBI) for an initial public offering (IPO).
The public float will comprise a fresh issue of shares worth Rs 2,000 crore ($269 million) and an offer for sale of up to 60.10 million equity shares by promoters and shareholders, according to the draft papers.
The company will use the proceeds from the fresh issue to augment its capital base and maintain solvency levels. The insurer's solvency ratio stood at 2.23x as of March 31, 2021, much higher than the regulatory requirement of 1.5.
Star Health started operations in 2006. It had a market share of 15.8% in the Indian health insurance market in fiscal 2021, according to Crisil Research.
The insurer's total income grew to Rs 7,568.87 crore in fiscal 2020-21 from Rs 5,554.96 crore in the previous financial year. The firm swung to a net loss of Rs 825.58 during the period from a net profit of Rs 268 crore.
"If we are unable to raise funds to finance future losses, those losses may have a significant effect on our liquidity as well as our ability to operate, which may in turn adversely affect our operations and financial conditions and the trading price of our equity shares," it said.
"In addition, we may incur significant expenses in connection with any expansion, strategic acquisition or investment," it added.
The company has a history of attracting private equity money starting with ICICI Venture and Sequoia Capital around a decade ago. The insurance firm also saw Tata Capital Growth Fund and Apis Partners come in as investors.
In 2018, a consortium of WestBridge, Madison and Jhunjhunwala acquired Star Health.
Safecrop Holdings Pvt Ltd, the buyers' consortium, signed definitive agreements to acquire the insurer from shareholders including Star Health Investments Pvt Ltd, and private equity firms ICICI Venture, Tata Capital and Apis Partners.
The co-investors in this deal include endowment funds of MIT and University of Notre Dame.
Apis Partners, which had invested in Star Health in 2016, retained a minority stake in the insurer.
Star Health had 737 health insurance branches across 26 states and four union territories in India as of 31 March 2021.
Its products -- retail health, group health, personal accident and overseas travel -- accounted for 87.9%, 10.5% , 1.6% and 0.01%, respectively, of total gross written premium (GWP) in fiscal 2020-21.
The book lead running managers to the issue are Kotak Investment Banking, Axis Capital, Bofa Securities India, Citigroup Global markets India, ICICI Securities, CLSA India Pvt Ltd, Credit Suisse Securities India, Jefferies India Pvt Ltd, Ambit Pvt Ltd, DAM Capital Advisors, IIFL Securities and SBI Capital Markets.
Other private sector insurance companies that have listed in recent years are HDFC Life Insurance Co Ltd, ICICI Prudential Life Insurance and ICICI Lombard General Insurance.