Star Health Insurance IPO Buy or Not? Check GMP, Allotment, IPO Details

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Star Health and Allied Insurance Introduction

Rakesh Jhunjhunwalla’s backed Star Health and Allied Insurance is coming up with a Rs 7249 Crore IPO. From being the first standalone health insurance (SAHI) company established in India in 2006, the company has grown into the largest SAHI company in the overall health insurance market in the country with a total GWP of Rs. 9,348.95 crores and a pan-India distribution network of 737 health insurance branches spread across 26 states and 4 union territories in India as of March 31, 2021.

What are the risk factors in Star Health Insurance IPO?

1. The company generates most of the revenue (approx 89%) from the retail insurance sector, any negative effect to retail insurance may have an adverse effect on the company

2. The company has outstanding legal proceedings involving equity shares, which may adversely affect the business

3. The company is highly dependent on insurance agents for the distribution of insurance policies

4. The director of the company has ongoing criminal cases under IPC, which may adversely affect the reputation of the company

5. The company incurred a loss of Rs 825.58 Cr in FY-21 and may also incur losses in future

6. The company is in high debt of Rs 2.50 billion as of March 2021

7. The company is bound to secure the privacy of its clients and any incapability may lead to adverse consequences

8. The IPO proceeds from the offer for sale (OFS) will directly go to the shareholders and the company will not be benefitted from it.

9. The company promoters don’t have adequate experience in the business

What are the competitive strengths of Star Health Insurance IPO?

1. The company is the largest private health insurance company in India with 15.8% of the overall health insurance market share

2. The company is also the largest retail health insurance company in India

3. The company has a pan India distribution network

4. The company has a substantial investment in technology towards innovative business processes

5. Before the Covid-19 pandemic the company has shown good and consistent revenue with-profits

6. The company has zero contingent liabilities

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What are the product offerings of Star Health and Allied Insurance

1. Retail health insurance, which is paid for by private individuals or families, generally through out-of-pocket expenses or private insurance;

2. Group health insurance, which is paid for by employers typically in the form of company health insurance plans that
may involve co-payments by the employee;

3. Government health insurance, which is paid for by the government, is typically in the form of central or state government health insurance programs.

4. Personal accident and travel insurance, which is paid for by either individuals or families or by employers.

What is the Object of the Star Health Insurance IPO offer?

IPO proceeds from the offer for sale (OFS)

The IPO proceeds from OFS will directly go to the shareholders and the company will not receive any part from it

IPO proceeds from the fresh issue

The company will utilize funds to augment Company’s capital base and maintain solvency levels

What is the Financial track record of Star Health Insurance?

  1. The company financials are affected due to Covid-19 pandemic
  2. The company incurred loss in FY-21
  3. The company has a consistent growth in revenue
Financial Year EndedRevenue (₹ Crores)PAT (₹ Crores)EPS (₹)
March 20193,713.52128.232.78
March 20204,885.37268.005.48
March 20215,283.39-825.58-16.54
Financials of Star Health Insurance IPO

Star Health Insurance IPO open & close date

Open date: 30th Nov 2021, Close date: 2nd Dec 2021

Star Health Insurance IPO allotment & listing date

Allotment date: 7th Dec 2021, Listing date: 10th Dec 2021

Star Health Insurance IPO allotment check

Allotment can be checked through their registrar website kcas.kfintech.com

Star Health Insurance price band

Price range870 – 900
Minimum order quantity16
Star Health Insurance IPO price band

Star Health Insurance IPO GMP?

Grey market premium is Rs -10 as of 4th Dec 2021

Star Health Insurance IPO overpriced or not?(Valuation)

Calculating with its upper price band of Rs 900

Now, the EPS (earning per share) for FY21 is negative so it is not possible to calculate the P.E ratio till march 2021

However, if we take the EPS for FY20 which is 5.48 so the P.E ratio comes at 900/5.48= 164.23X P.E ratio

So, if we check the sector P.E ratio which is 27X approx, considering it this IPO is overpriced in its sector

Star Health Insurance IPO is good or bad?(Review)

It is the largest private health insurance company in India with a pan India distribution network, the company has shown decent revenue and profits before the pandemic, however, the company came in a loss in FY-21. If we see from an investment perspective the company is overpriced in its sector so investment will be better if the company price corrects and also after the company comes in profit.

However, for listing gains it will be good as maximum IPO’s despite bad financials are showing good listing gains

Rating: 3 out of 5.

FAQ

Is there any employee discount in Star Health IPO?

Yes Rs 80

Is there any quota for policyholders of Star Health in Star Health IPO?

NO

Rakesh Jhunjhunwalls’s stake in Star Health IPO

14.98%

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