Standalone health insurance provider Star Health & Allied Insurance Co. Ltd, which is majority owned by Westbridge Capital and Rakesh Jhunjunwala’s Rare Enterprises, is eyeing a valuation of around Rs50,000 crore for its upcoming IPO, which opens on 30 November.
The IPO valuation is a significant jump from its valuation in 2018, when the Westbridge and Jhunjunwala consortium acquired a 90% stake in the company for around Rs6,000 crore. Founded in 2006 as India’s first standalone health insurance provider, Star Health provides health, personal accident and overseas travel insurance.
The insurer’s management believes that incoming new investors will find the valuation very comfortable given the company’s growth prospects, its business model and market position.
The recent weak listing of Paytm had led to an uproar on social media on IPO pricing and valuations as the stock slid almost 37% in just two days after its listing.
“The valuation has been arrived at scientifically looking into various factors. And definitely we believe this valuation will be very comfortable for the new investors also. But we are more focused on the long term growth and we believe that we’ll be able to deliver the results in the long term,” said Anand Roy, managing director at Star Health.
S Prakash, managing director of Star Health added,”Our business is totally different. It’s all built on strong fundamentals and solid growth. And our performance has been analyzed by a good number of investment bankers and analysts and we had various levels of decision with 150 plus investors during the roadshow and on a proper comparison and benchmarking with other listed players in the market, we have arrived at this valuation.”
Star Health has set a price band of Rs870-900 a share for its IPO. The shar sale comprises a fresh issue of shares worth Rs2,000 crore and a secondary sale of 58.32 million shares by existing shareholders of the company. The IPO will close on 2 December.
According to the management, while the spurt in growth seen due to covid-related policies has started to ebb, the company is seeing several new opportunities that will drive strong growth in the medium term.
“Our business continues to grow at close to 27% on a yoy basis. The COVID specific policies which were in high demand last financial year are not there this year. And to that extent, there has been muted growth on the hyper demand, which happened last year. But we are also witnessing new areas of growth. For example, in the younger age group, we are seeing a lot of demand coming from the semi urban and rural markets. So, these are new areas which have opened up for us and we are well poised to capture these demand segments, which we are working on very aggressively,” said Roy.
On the back of favourable tailwinds for the insurance sector created by the pandemic, the company expects to maintain above industry growth rates.
“The penetration of health insurance is very, very low in India and this pandemic event has opened up everyone’s thoughts about having your health insurance coverage of their own. So, I think we are well placed to capture that opportunity. And given that scenario, we should be able to maintain our higher than industry growth rate in the medium term also,” said Roy.
Apart from continuing to double down on its core retail segment, the company is also planning to augment its growth by expanding its distribution side.
“We will expand our distribution channels. We are a little behind others as far as bancassurance is concerned. So, we will be focusing on improving our bancassurance distribution, our digital distribution that is on our websites and partnerships with fintech companies. So, these are the areas we are looking for very aggressively, apart from the agency business which remains the mainstay of our business model,” said Roy.
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