RatingSUBSCRIBE (Long Term Only)Issue OfferIssue Opens on Nov 30, 2021Issue Close on Dec 02, 2021Total IPO size (cr) 7,249.18Fresh issue 2000.00Offer For Sale (cr) 5,249.18Price Band (INR) 870-900Market Lot 16Face Value (INR) 10Retail Allocation 10%Listing On NSE, BSEObjects of the issue ⮚ To augment the company’s capital base and insolvency level.Issue Break-up (%)QIB Portion 75NIB Portion 15Retail Portion 10Shareholding (No. of Shares)Pre Issue 553,289,944Post Issue 575,620,567Indicative TimetableFinalisation of Basis of Allotment 07-12-2021Refunds/Unblocking ASBA Fund 08-12-2021Credit of equity shares to DP A/c 09-12-2021Trading commences 10-12-2021
SME-IPO of Star Health Insurance is on the boom as Star Health and Allied Insurance Company Ltd is one of the largest private health insurers in India with a market share of 15.8% in Fiscal 2021. From being the first standalone health insurance ("SAHI") company established in India in 2006, it has grown into the largest SAHI company in the overall health insurance market in India, according to CRISIL Research.
Company offer 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 their total Gross written premium (GWP) in Fiscal 2021.
Individual agents are the primary distributors of the company's health insurance plans, accounting for 78.9% of their GWP in Fiscal 2021. In addition, the company has successfully built one of India's largest health insurance hospital networks, with 11,778 hospitals as of September 30, 2021.
⮚ Company consistently ranked first in the retail health insurance market in India based on retail health GWP over the last three Fiscal Years, according to CRISIL Research.
⮚ The retail health market segment is expected to emerge as a key growth driver for the overall health insurance industry in India after the COVID-19 crisis in India.
⮚ As of September 30, 2021 its distribution network had grown to 779 health insurance branches spread across 25 states and 5 union territories in India.
⮚ The company has also successfully built one of the largest health insurance hospital networks in India, with 11,778 hospitals, of which 7,741 hospitals, or 65.7 percent of the total number of hospitals in their network, entered into pre-agreed arrangements with in Fiscal 2021.
Outlook & Company Valuation:
The company has mixed set on financials over the last three years where the company's GWP has increased over the years while the company suffered a loss in FY21. In FY19, the revenues of the company were Rs 3713 cr while in FY21 it grew to 5283 cr.
The Profit was at Rs 128 cr in FY19 while the company suffered a loss of Rs 825 cr in FY21. The health insurance sector is likely to flourish as individuals become more aware of the benefits of health insurance. If we look at the company's financials, we can see that it was doing well until Covid hit last year. The company has the largest market share which is positive for the company however the industry is getting competitive.
The valuation of the company is stretched. At the upper price band of Rs. 900, Star Health is demanding an MCAP to net premium earned multiple of 10.3x, which is at a premium to the peer average.
IPO Note
STAR HEALTH AND ALLIED INSURANCE COMPANY LTD IPO
KEY MANAGERIAL PERSONNEL
⮚ Venkatasamy Jagannathan is the Chairman and CEO of the Company. He holds master’s degree of arts in economics and have more than 47 years of experience in the insurance industry
⮚ Subbarayan Prakash is the Managing Director of the Company. He has several years of experience as a surgeon and has previously worked with Saudi Operation & Maintenance Company Limited.
⮚ Anand Shankar Roy is the Managing Director of our Company. He holds a bachelor’s degree in commerce and he has 21 years of experience in the insurance industry
⮚ Sumir Chadha is a Non-Executive Nominee Director of the Company he has several years of investing experience in Indian companies, both public and private.
⮚ Deepak Ramineedi is a Non-Executive Nominee Director of the Company. He has several years of experience in the private equity industry
⮚ Utpal Hemendra Sheth is a Non-Executive Nominee Director of the Company. He holds a bachelor’s degree in commerce.
⮚ Rohit Bhasin is an Independent Director of the Company
⮚ Anisha Motwani is an Independent Director of the Company.
⮚ Berjis Minoo Desai is an Independent Director of the Company
⮚ Kaarthikeyan Devarayapuram Ramasamy is an Independent Director of the Company
⮚ Rajni Sekhri Sibal is an Independent Director of the Company
⮚ Rajeev Krishnamuralilal Agarwal is an Independent Director of the Company
COMPETITIVE STRENGTHS
⮚ Largest private health insurance company in India with leadership in the attractive retail health segment.
⮚ Largest and well spread distribution network in the health insurance industry.
⮚ Diversified product suite with a focus on innovation and specialized products.
⮚ Strong risk management with superior claims ratio and quality customer services.
⮚ Substantial investment in technology and innovative business processes.
⮚ Demonstrated track record of operating and financial performance.
⮚ Experienced senior management team with strong sponsorship.
KEY CONCERNS
⮚ 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.
⮚ The recent Covid-19 outbreak has had a significant impact on the company's business and operations.
⮚ They were able to keep their market share because of their strong brand name. However, if they fail to keep such a brand name, their business will suffer.
⮚ Company can be subject to claims by customers and/or regulators for alleged mis-selling.
⮚ Insurance companies depend on the accuracy and completeness of information provided by customers and counter parties for pricing and underwriting their insurance policies.
⮚ Any increase in competition could negatively impact the company’s profitability
IPO Note
STAR HEALTH AND ALLIED INSURANCE COMPANY LTD IPO
COMPARISON WITH LISTED INDUSTRY PEERS (As on 31st March 2021)
Name of the Company EPS (Basic) NAV P/E Net Worth (cr) RoNW (%)Star Health and Allied Insurance Co Ltd (16.54) 63.58 - 3,484.64 (23.69)% Peer GroupICICI Lombard General Insurance Co Ltd.* 32.41 163.56 46.66 7,435.15 19.81%New India Assurance Co Ltd 9.95 112.17 15.30 18,485.38 8.81%
*ICICI Lombard General Insurance Company Ltd. is not strictly comparable with the Company as they operate under general insurance with health insurance not forming a significant component, whereas the Company is a standalone health insurance provider.
FINANCIALS (RESTATED CONSOLIDATED)
Particulars (Rs. In Cr) FY 2021 FY 2020 FY 2019Equity Share Capital 548 491 456Other Equity 3,676 1,153 587Net Worth 4,224 1,644 1,043Total Borrowings 250 250 250Premiums earned (Net) 5,023 4,693 3,580Operating Profit/(Loss) (1,071) 361 165Profit Before Tax (1,046) 413 182Net Profit for the year (825) 268 128
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