Star Health IPO listing likely tomorrow: What to expect? Buy, sell or hold? Know what analysts recommend

There are two Rakesh Jhunjhunwala-backed companies that are in the news due to their initial public offerings (IPOs). One is Star Health and Allied Insurance Co. Ltd, which could not attract investors as the issue failed to fully subscribed even on the last day. Second one is Metro Brands Ltd. (MBL), which will open for subscription on December 10 and close on December 14, 2021. 

The former is likely to be listed on the exchanges tomorrow December 10, as per Upstox. The initial public offering (IPO) of Star Health had been subscribed 79 per cent on the last day of the offer.  The share sale received bids for mere 3,55,45,560 stocks as against a total of 4,49,08,947 shares on offer. The retail portion of Star Health IPO, however, was subscribed 1.09 times.   

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Meanwhile, a Reuters report citing the prospectus of the company on Wednesday claimed that India's largest private health insurer Star Health will cut the size of its initial public offering (IPO) to Rs 6,400 crore ($848.02 million) from Rs 7,249 crore earlier after a subdued response to the IPO last week. 

Backed by billionaire stock investor Rakesh Jhunjhunwala, the company had priced its IPO between Rs 870 and Rs 900 per share and a banking source had told Reuters that the company was aiming for a nearly $7 billion valuation. 

As investors would be in a fix after flop show by the IPO and would want to know what to do with this share on its listing, we spoke to analysts, who suggested to either buy it at fair valuation or sell on listing.   

Manoj Dalmia, Founder and Director, Proficient Equities Limited:  

Star Health IPO received a poor response with only 79% of the issue subscribed. It is overvalued at a price of Rs 870-900 per share despite the company suffering losses due to huge claims in pandemic.  

Could we expect any listing gains?  

As per data, the GMP is negative at Rs 70, expect a discounted listing of 8-10%.  

Recommendation:  

Immediate selling is recommended considering its high valuation, one can expect price falls like that of Paytm. Buying at a fair valuation or lower price is suggested.  

Ravi Singh, Vice President & Head of Research, ShareIndia  

It may list at discount due to low subscription, however, taking in view the business parameters, the long-term outlook of the health insurance sector is positive. Investors may buy at lower levels and keep their holdings for better gains. 

Aayush Agrawal, Sr. Research Analyst - Merchant Banking, Swastika Investmart Ltd. 

Star health insurance, the largest private-sector health insurance company will poor response due to expensive valuations, dent in profitability due to covid19 and fragile sentiments post a weak listing of Paytm. The listing is expected on a poor note. However, the long-term outlook for the industry and Star health insurance is promising, therefore we can expect buying interest at lower levels.

The IPO had opened on November 30 and concluded on December 2, 2021.   

Backed by Rakesh Jhunjhunwala and India’s first pure-play health insurance company, Star Health and Allied Insurance Company Ltd. (Star Health), came up with an IPO to raise around Rs 7,250 crore. The price band was Rs 870 - 900 per share.      

Around 75 per cent of the issue size was reserved for the Qualified Institutional Buyers (QIBs), 15 per cent for the Non-Institutional Investors, and the remaining 10 per cent for the Retail Investors. The public offer included a reservation of shares worth Rs 100 crore for employees as well.      

Incorporated in 2006, Star Health and Allied Insurance Company Ltd (Star Health) is one of the largest private health insurers in India with a market share of 15.8% in Fiscal 2021. The company primarily focuses on the retail health market segment.