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Star Health and Allied Insurance Ltd IPO (Star Health IPO) Detail

Add to Calendar 2021-11-30 12:00 AM 2021-12-02 12:00 AM Asia/Kolkata Star Health and Allied Insurance Ltd IPO (Star Health IPO) Detail Star Health India

Issue Details

Dates: 30th Nov, 2021 to 2nd Dec, 2021

Price Band: Rs.870 to Rs.900/-

Minimum Lot: 16 shares

Minimum Application Amount: Rs.13,920 to Rs.14,400/-   

Total Issue Size: Up to Rs.7,249 crore (Fresh issue Rs.2,000 crore and OFS Rs.5,249 crore)

Objects of the offer

The objects of the Offer are to augment the company’s capital base and maintain solvency levels and for General Corporate purposes. Out of the total Rs.5,249 cr offer for sale private investor Safecrop is selling almost entire of its stake (93%) from the company and 53% of total OFS comprises of Safecrop’s stake only.

 

Corporate Profile & Business overview

Star health Insurance Limited is the largest private health insurer in India with a market share of 15.8% as of FY21. The company is strategically focused on the retail health market segment which has grown by 32.5% CAGR and had retail health gross written premium (GWP) of Rs.821.50 crore in FY21. Further, the company has been consistently ranked first in the retail health insurance market in India based on retail health GWP over the last three fiscal years.

The insurer's health insurance plans are largely distributed through individual agents, who accounted for 78.9% of its GWP in FY21. Individual agents are the major mode of distribution in the health insurance business since health insurance is generally an aided product in which clients frequently want assistance in picking the appropriate policy for their needs as well as throughout the claims process. The company's total number of individual agents increased at a 27.3% CAGR from 0.29 million in Fiscal 2019 to 0.46 million in FY21.

The company has in-house claims management capabilities, which lowers the expenses connected with the claims process, improve the accuracy and cost-efficiency of real claim amounts, and detect fraudulent claims more effectively. Its claims functions are likewise centralized in general.

 Star Health Insurance has successfully built one of the largest health insurance hospital networks in India, with more than 10,870 hospitals. Out of the total number of hospitals in its network, it has entered into pre-agreed arrangements with over 7,000 hospitals, or 64.9%, of the total number of hospitals in network as of March 31, 2021.

The company operates with five insurance coverage options – Retail health insurance, Group health insurance, Personal accident and Travel insurance which accounted for 87.9%, 10.5%, 1.6% and 0.01%, respectively, of their total GWP in Fiscal 2021.

· Retail health products target a variety of customer segments, including individuals, families, students, senior citizens, as well as persons with pre-existing medical conditions across the broader middle market customer segment

· Group health insurance policies provide coverage to employees of corporates, including SMEs, through company health insurance plans. Star’s group health policies are sold through corporate agents and brokers, corporate agent banks and online channel partners.

· Personal accident insurance provides benefit-based coverage to policyholders for accidents suffered by them

· Travel insurance cover domestic and foreign travel with three plans to provide health insurance assistance. These plans are available to permanent residents in India, corporate executives abroad for business purposes.


Financials

 

Particular (Rs. Crs)

FY21

FY20

FY19

Gross Written Premium

9349

6,891

5,415

Net Written Premium

7,140

5,260

4,140

EBITDA

(975)

468

236

PAT (from continuing operations)

(826)

268

128

Combined Ratio

115%

93%

94%

Solvency Ratio

2.23x

1.5x

1.53x

Return on Equity

(32%)

(19%)

13%

 

Star Health has grown its Gross Written Premium (GWP) at a 32.5% CAGR over FY19 to FY21 as compared to the industry growth of 28% YoY growth in FY21. During the Covid-19 hit FY21 the company reported losses as well as elevated combined and solvency ratio despite this the company continued to report market share gains and a whopping increase of 38% in the policies sold YoY in FY21. Star Health has been improving its market share on YoY basis and now commands a healthy market share of 16% (ex. Travel & PA) in FY21. Strong growth for Star Health is attributable to its leadership in retail health segment, which has grown at a CAGR of 33% over FY19-21 and commands the industry’s highest market share of 31% in retail health segment in FY21.


Strengths

· India's largest private health insurance business, with a strong presence in the lucrative retail health segment.

· One of the largest and well spread distribution networks in the health insurance industry and an integrated ecosystem.

· Diversified product suite with a focus on innovative and specialized products

· Superior claims ratio and exceptional customer service, driven by a strong risk management focus and domain expertise.

Risks


· Covid-19 pandemic still remains key concern, the effect of the pandemic resulting in higher claim payments

· Inflexibility regarding pricing of health insurance policies may affect result of operations

· Discontinuance of the voluntary quota share treaty reinsurance treaty and the change in method of accounting for UPR has materially impacted company’s financial condition

· The company has worth Rs.462 cr material civil litigations proceedings pending in the court.

· Insurance is a highly competitive, evolving and rapidly changing industry.

Conclusion

 

Despite increasing awareness about the need for a health cover post the Covid-19 shock, insurance remains an underpenetrated segment in India. Star Health Insurance being the leader in retail health insurance space with a lion’s market share is well poised to grow given its well spread distribution network. Also, post the issue, company’s solvency ratio would remain at a comfortable level of approx. 2.5x and seems likely it will not need to raise additional capital for next few years. Although a significant stake is being offloaded by one of the promoters, the rest remain convinced in the future growth story of the business. Investors should look to subscribe to this IPO from a longer horizon and stay invested even post listing day. A buy-and-hold strategy will help reap better benefits in Star Health Insurance’s case.

Issue Detail

  • Issue Open: Nov 30, 2021
  • Issue Close: Dec 02, 2021
  • Issue Type: Book Built Issue IPO
  • Face Value: Rs. 10 per equity share
  • Price Band: Rs. 870 to Rs. 900 per equity share
  • Bid Lot:16 Shares
  • Minimum Order Quantity:16 Shares
  • Listing At: BSE, NSE
  • Issue Size: Rs. 7,249.18 Cr

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