Star Health Insurance IPO - Dates, IPO Price, Analysis, Review, Share Price, Valuations

Star Health Insurance IPO – Should you invest in this IPO backed by Rakesh Jhunjhunwala?

Star Health Insurance IPO - Dates, IPO Price, Analysis, Review, Share Price, ValuationsStar Health Insurance IPO (Star Health and Allied Insurance Limited IPO) Details

Chennai based Star Health and Allied Insurance Limited is coming up with IPO which  would open for subscription on 30th November 2021. Rakesh Jhunjhunwala backed, Star Health is one of the largest private health insurance companies in India with a market share of 16% in FY2021. The company has incurred negative revenues (you heard right) and losses in the last 1.5 years. After disaster listing of PayTM IPO, investors are skeptical about upcoming IPOs. Should you invest in Star Health Insurance IPO? What are the risk factors an investor should consider before investing in Star Health IPO?  Let me do IPO review and indicate whether investors should buy or not.

Also Read: This International Mutual Fund invests in Global Stocks beyond tech

About Star Health and Allied Insurance Company Limited

Chennai based Star Health and Allied Insurance Company Limited is one of the largest private health insurance companies in India. For FY2021 it has a market share of 16%.

It primarily focuses on the retail health insurance market segment. Company offers a wide range of flexible and comprehensive coverage options for retail health, group health, personal accident, and overseas travel, accounting for 87.9%, 10.5%, 1.6%, and 0.01%, respectively for FY2021.

This health insurance company mainly distributes policies through individual agents, banks and through other corporate companies. Its network distribution includes 737 health insurance branches across 26 states and 4 union territories in India. Star Health has built one of the largest health insurance hospital networks in India with more than 10,870 hospitals.

Star Health Insurance IPO details

IPO Opening Date 30-Nov-21
IPO Closing Date 02-Dec-21
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 870 to Rs 900 per equity share
Lot Size 16 Shares
Min Order Quantity 16 Shares
Listing at BSE and NSE
Issue Size Total Size Rs 7,249.18 Crores
Fresh issue – Rs 2,000 Crores
OFS: Rs 5,249.18 Crores
Employee Discount Rs 80 per share

Star Health Insurance IPO RHP Prospectus

What are Star Health and Allied Insurance Limited strengths?

Company is one of the largest private health insurance companies in India with leadership in the attractive retail health segment.

Company has largest network distribution in the health insurance industry.

It has diversified product suite with a focus on innovation and specialized products.

It has a strong risk management with superior claims ratio and quality customer services.

It has demonstrated track record of operating and financial performance.

What are the Objects of the Offer?

Star Health and Allied Insurance IPO Size is Rs 7,249.18 Crores, out of which

1) Offer for Sale (OFS) for Rs 5,249.18 Crores – Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.

2) Fresh issue for Rs 2,000 Crores – These proceeds would be utilized to augment the company’s capital base and insolvency level.

Who is the promoter of Star Health and Allied Insurance Company Limited?

Safecrop Investments India LLP, Westbridge AIFI and Rakesh  Jhunjhunwala are the promoters of the company.

How is the company financial track record?

Here are the total assets, revenues and profits of the company in the last 3 years.

Financial Year ending / Period ending (Amt in Mns)
Particulars FY19 FY20 FY21 H1 FY22
Total Assets 16,426.4 18,967.7 44,665.7 49,749.4
Revenues 2,262.5 4,619.6 -9,077.8 -4,946.8
Profit After Tax 1,282.3 2,680.0 -8,255.8 -3,802.7
Profit % 56.67% 58.01% NA NA

Why to invest in Star Health Insurance IPO?

Here are the positive factors in this company.

1) Company is one of the largest private health insurance companies in India. Company has attractive retail health segment. It also has the largest health insurance hospital networks in India.

2) Star Health is the market leader in retail health insurance business almost 3 times (31.3%) the size of the next player in FY2021 (HDFC Ergo which is 10.4% and New Insurance Assurance share of 9.9%).

3) Company is backed by Rakesh Jhunjhunwala. Stocks invested by Jhunjhunwala are considered as best bet by the stock market investors.

4) Company expenses are at 29% of gross premiums received and lowest among the entire standalone health insurance companies in India.

5) Company employees would get a discount of Rs 80 per share (8.8%) if they apply through this IPO.

Risk Factors in Star Health Insurance IPO

1) Star Health Incurred Claim Ratio has increased from average 63.5% (FY2018 to FY2020) to 94% in FY21 and 91% in Q1 FY22. This is the main reason company has negative revenues and losses in the last 1.5 years. See below chart about the claims ratio of various health insurance companies.

2) Company net revenues are negative in the last 1.5 years. Company might post such negative revenues in future too.

3) Company has incurred huge losses in the last 1.5 years. Company indicated in RHP that it might incur losses in future too.

4) The recent Covid-19 outbreak has significantly affected company business and operations.

5) Due to a good brand name, they were able to maintain market share. However, if they are unable to retain such brand name, their business would get affected.

6) Like any other insurance company, such company depends on accuracy and completeness of information provided by customers and counter parties for pricing and underwriting its insurance policies. If the information is inaccurate, it can lead to higher claims and can disrupt its business.

7) Company can be subject to claims by customers and/or regulators for alleged mis-selling.

8) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.

Star Health IPO dates for subscription, Allotment and Listing

Offer Open 30-Nov-21
Offer close 02-Dec-21
Finalization of Allotment 07-Dec-21
Initiation of Refunds 08-Dec-21
Credit to Demat Account 09-Dec-21
IPO Shares Listing Date 10-Dec-21

Star Health IPO Valuation

Star Health Insurance share price band is Rs 870 to Rs 900 per share. Let us check Star Health IPO valuations here.

1) If we take last 3 years weighted average EPS of Rs 0.91 and the upper price band of Rs 900, the P/E ratio works out to 989x.

2) Since the company has incurred loss for FY2021, we cannot compute the P/E ratio for this period.

3) Since the company has incurred loss for H1 FY2022, we cannot compute the P/E ratio for this period.

4) Means company is asking IPO price in the P/E of 989x.

As per RHP, there are listed peers like ICICI Lombard Health Insurance trading at P/E of 46x (Highest) and New India Assurance company trading at P/E 15.3x (Lowest) and industry average P/E is at 31x.

While it is not appropriate to compare, considering the last 3 years financials, Star Health Insurance IPO price is highly priced.

What is Star Health Insurance IPO Grey Market Premium?

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market.

Currently the GMP is at Rs 150 per share.

Star Health Insurance IPOWatch GMP also indicates Rs 150 per share as of the date of writing the article.

Also Read: Tata Corporate Bond Fund invests in AA+ Bonds – Should you invest or avoid?

Frequently Asked Questions (FAQs)

What are Star Health Insurance IPO Dates?

This IPO opens on 30th November and closes on 2nd December, 2021

What is Star Health Insurance IPO Price?

The IPO Price Band is Rs 870 to Rs 900 per share. Employees of the company would get Rs 80 per share discount

What are Star Health Insurance IPO Valuations?

Star Health IPO Price is valued at P/E of 989x based on last 3 years average EPS. For FY21 and H1 FY22, the P/E cannot be computed as it incurred losses. Considering these details, the IPO is highly priced

How to apply Star Health IPO through Zerodha?

If you have demat account with Zerodha, you can apply this IPO online using UPI as a payment gateway. Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form. Follow below steps to apply this IPO in Zerodha platform: 1) Visit the Zerodha portal and login to Console. 2) Go to Portfolio and click the IPOs link. 3) Visit 'Star Health and Insurance IPO' row and click the 'Bid' button. 4) Enter your UPI ID, Quantity, and Price. 5) Click on ‘Submit’ IPO application form. 6) Visit the UPI App (net banking or BHIM) to approve the mandate.

What is Star Health IPO Lot Size?

This IPO lot size is 16 Shares, means investors need to apply for minimum order quantity is 16 Shares.

What is the minimum amount to subscribe for Star Health IPO?

Investors need to apply for 16 shares minimum at lower price band of Rs 870 per share. Minimum amount in such case would be 16 x 870 = Rs 13,920

Star Health Insurance IPO is Good or bad for investment?

Star Health IPO price is highly priced. Company has been incurring losses in the last 18 months due to high claims in this covid-19 pandemic. Investors should wait and watch this moment.

Star Health Insurance IPO Review and Recommendation

You might be wondering, “Star Health Insurance IPO should i buy or not”?

Star Health Insurance is one of the leading private health insurance companies in India.

Company generated negative revenues due to high insurance claims for the past 1.5 years. This is majorly due to covid-19 pandemic claims where the incurred claim ratio moved from average 63% to over 90%.

Company has been incurring losses in the last 1.5 years.

I have earlier indicated in our articles that one should take a health insurance from a company whose incurred claim ratio is in between 50% to 80%.  The balance would go for expenses or any profits that company wants to retain.

On of the face of it, Star Health Insurance IPO price is highly priced.

While the company has a good brand, considering increased incurred claim ratio in the last 18 months and we may expect covid pandemic impact on such health insurance companies would be there for another couple of quarters, one can wait and watch this IPO. If such shares are available at lower prices post listing, investors can invest in this company shares for medium to long term.

Did you like our IPO Analysis, then share it with your friends on WhatsApp, FB, Twitter and Telegram?

Suresh KP

11 thoughts on “Star Health Insurance IPO – Should you invest in this IPO backed by Rakesh Jhunjhunwala?”

  1. As per your technical analysis of their financials, I too feel to skip this IPO and wait for corrections in this overheated market.

  2. how strange , even after incurring losses in previous qtrs they asking highly over price for IPO.
    I am staying away like paytm. Lets wait and watch.

  3. Please share your insights on whether retail investor should invest in the ‘PGIM India Global Select Real Estate Securities Fund of Fund’ or avoid it?

  4. (1) Against the acquisition price (as given in the Company’s newspaper ad upfront) of the selling promoters/shareholders is between Rs. 47 to Rs. 175.69 and they are charging a price of Rs. 870 to 900 per share.
    (2) As rightly indicated, Company’s claim ratio is very high leaving negligible for expenses and profits.
    (3) Incurring losses for the last 1.5 years.
    (4) GMP is coming down with each passing day.
    As rightly advised by Mr. Suresh, one can wait and invest in such scrips after the waning of market hype and settling of sensible pricing in the market.

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