PE-backed Star Health slips on stock market debut after IPO flop

 PE-backed Star Health slips on stock market debut after IPO flop

Star Health & Allied Insurance Co. Ltd, India’s largest health insurance firm by market share, made a lacklustre debut on the stock exchanges with its shares listing at 5.6% discount.

Shares of Star Health began trading on the BSE at Rs 848.80 per share compared with the initial public offering (IPO) price of Rs 900 apiece.

The shares touched a high of Rs 899 and low of Rs 827.50 in early trade. The shares eventually closed at Rs 906.85 apiece. The BSE’s benchmark Sensex ended flat.

The company now commands a market capitalisation of Rs 50,499 crore ($6.47 billion) versus a valuation of Rs 51,796 crore ($7 billion) it sought through the IPO.

The weak start to Star Health’s market journey mirrors the response to its IPO that managed to sail through after the company trimmed its size by 11.7%.

The IPO originally comprised a fresh sale of shares worth Rs 2,000 crore and a secondary market sale of 58.32 million shares by its existing shareholders, totalling Rs 7,250 crore. The shareholders eventually sold 48.89 million. This brought down the IPO size to Rs 6,400 crore.

Star Health’s timing and IPO pricing acted as two major deterrents to investor demand, analysts said.

With the threat of Omicron, an emerging variant of the coronavirus, looming, investors chose to stay away from a company that reported a loss in the previous financial year and could take a hit given the spike in its claims ratio.

Yet, it demanded high valuation from public investors despite having a syndicate of 11 investment bankers in charge of arranging and managing the share sale.

Star Health is the largest private health insurer in India with a market share of 15.8%, according to CRISIL Research.

There are no directly comparable peers but among the private general insurers that offer health insurance as part of their product suite, ICICI Lombard would be a comparable firm. ICICI Lombard has a net worth of more than double that of Star Health and has a market capitalization of Rs 70,645 crore.

Star Health counts Indian private equity firm WestBridge Capital, Madison India Capital, London-based Apis Capital and ace stock market investor Rakesh Jhunjhunwala among its investors.

Other marquee investors include Singapore sovereign wealth fund GIC, the US-based Capital Group, Sator Grove and TIMF, which came in as part of a pre-IPO round.

Ankit Doshi

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