Star Health and Allied Insurance Company said it has fixed a price band of Rs 870-900 a share for its Rs 7,249-crore initial public offering, which will open on November 30.
The three-day initial public offering (IPO) will conclude on December 2. The bidding for anchor investors will open on November 29, the company announced.
The IPO comprises a fresh issue of equity shares worth Rs 2,000 crore and an offer-for-sale of up to 58,324,225 equity shares by promoters and existing shareholders.
The public offer includes a reservation of shares worth Rs 100 crore for employees. At the upper end of the price band, the initial share-sale is expected to fetch Rs 7,249.18 crore.
Proceeds from the fresh issue would be used to augment the company's capital base.
About 75 per cent of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.
Investors can bid for a minimum of 16 equity shares and in multiples thereof.
Star Health, a leading private health insurer in the country, is owned by a consortium of investors like Westbridge Capital and Rakesh Jhunjhunwala.
Here are other key details that investors should watch out:
Valuation
The first standalone health insurer’s IPO valuation at Rs 50,000 crore would need all the tailwinds from the industry to have a smooth sailing post the pandemic and to support the valuations. The Star Health IPO values the company at close to 10.3 times net premium earned in FY21 or 12 times Price/Book value.
The nearest listed peer, ICICI Lombard with 22 per cent health insurance contribution in FY21 is valued at price to net premium of 6.1 times and 6.6 times Price/Book. Star Health Insurance would have to grow at 20-25 per cent till FY23 with claims ratio gradually normalising to around 70 per cent for a valuation range of 4 times FY23 net premium or 7.3 times FY23 price/book value.
Key Risks
Any unfavorable change in government policies and regulations can harm 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 profitability.
“Unfavorable movement in the interest rates, stiff competition from other players and inability to manage hospital network and distribution channels”, are also a few major risks faced by the company as per the brokerage firm, Choice Broking.
Gaurav Garg, Head of Research, CapitalVia Global Research
I am expecting further selling in the market led by FIIs due to the rising dollar, and the globally new variant of COVID-19 along with more European countries entering into new COVID-19 restrictions.
As for Star Health IPO, “We are expecting the stock to list at around Rs 980-1,000 per share on the listing, but not expecting massive listing gains as we have seen in recent listed IPOs.”
