Star Health IPO comprises aggregating to Rs. 7249 crore entails a fresh issue of equity shares worth ₹2,000 crore and OFS of up to 58,324,225 equity shares by promoters and existing shareholders pf the company. Star Health which is a leading private health insurer in the country, is owned by a consortium of investors like PE firm Westbridge Capital and investor Rakesh Jhunjhunwala.
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Star Health IPO Details:
| Opening Date | 30th November, 2021 |
| Closing Date | 2nd December, 2021 |
| Issue Details | Fresh Issue aggregating upto ₹ 2,000 Cr |
| + Offer for Sale of 58,324,225 Equity Shares | |
| Issue Size (₹ Cr) | ₹ 7,074.21 – 7,249.18 Cr |
| Bid Lot | 16 Shares |
| Price Band | ₹ 870 – 900 |
| QIB | 75% of the net offer |
| NIB | 15% of the net offer ( Rs.1,072.38 Cr) |
| Retail | 10% offer ( 7,943,533 Shares, 714.92 Cr) |
| Applications for 1x Retail | ~ 5 Lac |
Updates :
Star Health has allocated equity shares to 62 anchor investors aggregating to ₹3,217 crore. The anchor investors include the government of Singapore, Abu Dhabi Investment Authority, Morgan Stanley Asia (Singapore) Pte, Goldman Sachs (Singapore) Pte among others. Other investors include SBI Life Insurance Company, HDFC Life Insurance Company , Edelweiss Mutual Fund have also been allotted shares.
Star Health IPO Review | Go Colors IPO Review: Video Presentation
About Star Health (India)
- Star Health is engaged in the development, design, sourcing, marketing and retailing of a range of women’s bottom-wear products under the brand, ‘Go Colors’.
- Go Fashion (India) Limited was established in 2011. It was first brand to specialize in women’s bottom-wear
- The company has 450 exclusive brand outlets (EBOs) across 23 states and union territories in India.
- Company’s distribution channels include large format stores (LFSs) including Reliance Retail, Central, Unlimited, Globus Stores, Spencer’s Retail etc.
- In fy21, Sales through LFSs, franchisees, MBOs and online retailers, represented 22%, 1.31%, 2.86% and 4.76%, respectively, of its revenues.
- Products cater to women across all age groups and girls and fits that are suitable to various body types and physiques.
- It Offers a wide range of bottom wear in terms of colors and styles to go with any top, all available under the same roof.
- Has over 50 legwear styles in over 120 colors from ethnic to western and fusion wear
Star Health IPO: Financials
| Particulars / (₹ In Cr) | sept 21 (6m) | Sept 20 (6m) | 2021(12) | 2020(12) | 2019(12) |
| Gross Written Premium | 5,069.78 | 3,967.19 | 9,348.95 | 6,890.67 | 5,415.36 |
| Growth (%) | 27.79% | – | 35.68% | 27.24% | – |
| EBITDA | -481.51 | 359.21 | -974.62 | 468.47 | 235.94 |
| Profit Before Tax | -512.63 | 316.57 | -1,045.95 | 413.43 | 182.25 |
| Net Profit | -380.27 | 199.29 | -825.58 | 268 | 128.23 |
| Equity Share Capital | 553.29 | 490.64 | 548.09 | 490.64 | 455.58 |
| Net worth as stated | 3,199.41 | 1,827.97 | 3,484.64 | 1,628.68 | 1,215.69 |
| EPS -Basic (₹) | -6.93 | 4.06 | 16.54 | 5.59 | 2.81 |
| RoNW (%) | -11.89% | 10.90%^ | -23.69% | 16.46% | 10.55% |
| Net Asset Value (₹) | 57.83 | 37.26 | 63.58 | 33.2 | 19 |
Salient Points
- Strategically focused on the retail health market segment and had retail health GWP of ₹8,215.09 crore and ₹4,339.92 crore in Fiscal 2021 and the 6 months ended September 30, 2021, respectively.
- Star Health offers a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel
- These accounted for 87.9%, 10.5%, 1.6% and 0.01%, respectively, of their total GWP in Fiscal 2021.
- Have specialized products, which focus on customers with pre-existing conditions
- Have claims processing experience of approximately 6 million claims.
- The company proposes to utilize the net proceeds towards augmentation of its capital base and maintenance of solvency levels.
Cons
- Impact of COVID-19 outbreak on its business has been significant.
- Star Health has incurred losses in FY21 and H1FY22
- Insurers are bound to invest a minimum of 30% of total investment assets in central and state government securities and other approved securities.
- Star Health solvency ratio was 1.52x, which is slightly above the regulatory requirement of 1.5x.
Star Health IPO: Assessment
- Star Health and Allied Insurance Company Limited (“Star Health”) is the largest private health insurer in India with a market share of 15.8% in the Indian health insurance market in Fiscal 2021. •One of the largest and well spread distribution networks in the health insurance industry.
- Diversified product suite with a focus on innovative and specialized products; •Good risk management focus with domain expertise driving a superior claims ratio and quality customer service.
- Has responded well to the challenges posed by COVID-19. •At present there are two listed general insurance companies – ICICI Lombard and New India Insurance.
- The company has suffered due to the pandemic and posted negative earnings for the last 15 months.
- Backing of PE investors.
- The combined ratio, is a measure of profitability used by an insurance company to gauge how well it is performing in its daily operations.
- For Star Health Combined Ratio has rather been stable, amounting to 94.3% in FY2019 and 93.2% in FY2020. In FY2021, Combined Ratio increased to 114.8% primarily due to certain exceptional accounting adjustments primarily related to withdrawal from a reinsurance treaty in FY2021 and exceptional impact of the COVID-19 crisis in FY2021.
- Solvency ratio was 1.52x, which is slightly above the regulatory requirement of 1.5x.
- The GMP of Star Health IPO in grey market was quite meagre or almost NIL
- Company in the past has issued shares and current valuations are steep.
- There is little Value comfort
- Prospects are quite good but valuations are quite stretched.
- Even if all goes well , Star Health may end up at a PE > 100 in the year when it turn profitable again.
- I am likely to skip Star Health IPO.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.