Rakesh Jhunjhunwala-backed Star Health IPO kicks-off; market analysts suggest this

As the initial public offer (IPO) of Star Health and Allied Insurance opened on Tuesday, the market experts and analysts list out the positives and negatives of the company and suggest to apply for the long-term basis for Rs 7249-crore IPO, which will be active till December 2, 2021.

The market analysts believe that Star Health being serving into the insurance sector mainly medical insurance and on the back of Covid scenario is a big positive for the company. 

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In this regard, Dr. Ravi Singh, Vice President & Head of Research, ShareIndia said, “Due to the Covid, the awareness in health insurance sector has increased and the retail health market segment is expected to emerge as a key growth driver for the overall health insurance industry in India.”

Besides, “Health Insurance sector has a strong positive outlook and since there are only two listed general insurance companies in India, ICICI Lombard and New India Insurance, we expect Star Health is a good option to invest for long term,” the market analyst said in a note.

Similarly, Ajit Mishra, VP Research. Religare Broking states, “Star Health stands to benefit from positive industry growth trends given its leadership position in the attractive retail health segment.”

The company has one of the largest and well-spread distribution networks in the health insurance industry and an integrated ecosystem and offers a range of flexible and comprehensive coverage. 

As per Mishra, the company’s financial performance was impacted in FY21 due to the pandemic and it intends to enhance its market leadership by leveraging its strong brand going ahead. 

The gross direct premium for health insurers is expected to grow at approximately 18 per cent CAGR over the next four years. Within this, the retail business is expected to grow at a CAGR of 23 per cent between FY21-25 as against 15 and 11 per cent CAGR growth in group and government business, Religare Broking said in research report of Star Health IPO.

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. Ace investor Rakesh Jhunjhunwala has 14.98 per cent stake in the company, while his wife Rekha Jhunjhunwala has 3.23 per cent stake. 

The company has fixed a price band of Rs 870-900 per share, and investors can bid for a minimum of 16 equity shares and in multiple thereof. The net proceeds from the fresh issue would be used to augment the company's capital base.