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Star Health IPO Opens Today: Price, Valuation, GMP, Key Risks, Should you Invest?

By: Swastika Das Sharma


Last Updated: December 02, 2021, 13:12 IST

Star Health and Allied Insurance Company is backed by Rakesh Jhunjhunwala

Star Health and Allied Insurance Company is backed by Rakesh Jhunjhunwala

Star Health IPO has a price band of Rs 870-900, while the Star Health IPO grey market premium stands at Rs 15 on Tuesday, November 30.

Star Health IPO: The initial public offering, or IPO of Star Health and Allied Insurance Company is set to open on Tuesday, November 30. The maiden issue of the Star Health IPO, backed by ace investor Rakesh Jhunjhunwala, will be open for three days. After the bidding process, the Star Health IPO will close on December 2, that is, on Thursday.  A day back, Star Health revealed that it had raised a little over Rs 3,217 crore from anchor investors ahead of opening the issue for the public. Star Health IPO is the last of its kind to be floated among the 10 more offers that preceded it in the month of November.

Star Health IPO Key Details, Financials

The Star Health IPO, open between November 30 and December 2, has a price band of Rs 870-900 for one share, the company announced earlier. tar Health and Alliance Company, backed by Rakesh Jhujhunwala, Safecorp Investments India and Westbridge, plans to raise Rs 7,247 crore through its maiden issue. The company has divided the IPO into two parts. Of this, Rs 5,249 crore is set to be raised via an offer for sale, wherein 58,324,225 equity shares will be sold by existing shareholders and promoters. The remaining Rs 2,000 crore will be a fresh issue.

Those who want to invest in the Star Health IPO can bid for a minimum of 16 equity shares and in multiples of 16 shares thereafter. Retail investors can invest a minimum of Rs 14,400 for a single lot. The maximum investment for retail investors will be Rs 1,87,200 for 13 lots. This is equal to 208 equity shares.

The company has reserved shares worth Rs 100 crore for its employees for the Star Health IPO. Apart from this, 75 per cent of the shares has been reserved for qualified institutional buyers, while non institutional buyers have been allotted 15 per cent of the shares. The remaining 10 per cent is reserved for retail buyers.

Star Health IPO Key Risks

The key risks in the Star Health IPO include the company being under unfavorable government policies and regulations. The health insurance industry has suffered a lot from a pandemic, and Star Health was no exception. Therefore, there is a continued risk from the Covid-19 pandemic, while there are no favourable movement in the interest rates for the company. There is an inability to manage hospital network and distribution channels in case of Star Health, and the company will have difficulties in improving and maintaining the profitability competitions.

Star Health IPO GMP Today

Taking cue from the key risks, the Star Health IPO was fetching a premium of Rs 15 on Tuesday against the upper end of the price band of Rs 900, as per IPO Watch. This was up by Rs 5, from the Star Health IPO grey market premium on Monday. However, this was still low and indicated poor performance during the Star Health IPO listing at the stock markets later in December.

Star Health IPO Valuation, Should You Subscribe?

Choice Broking: Pandemic despite positively impacting business growth, has impacted the profitability severely. In future occurrence of new virus wave or emergence of new variant will be a concern for the profitability. However, the risk will be lower as compared to levels witnessed during H1 FY22. The peers considered for benchmarking the valuation operate in general insurance market and health insurance is one of their various offerings. Thus these can be considered as proxy peer. At higher price band of Rs. 900, Star Health is demanding a MCAP-to-net premium earned multiple of 10.3x, which is at premium to the peer average. Moreover, the demanded valuations is at elevated premium to recent capital issuance. Thus considering the above observations, we assign a “Subscribe with Caution” rating for the issue.

ICICI Direct Research: Star is a leading player in the health insurance industry with a strong distribution network, diversified product suite. At the upper end of price band, the company is valued at 5.9x AUM as on September 30, 2021. We assign UNRATED rating to the IPO.

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first published:November 30, 2021, 09:50 IST
last updated:December 02, 2021, 13:12 IST