Star Health and Allied Insurance IPO

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About Star Health Insurance

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. Star Health has been leading the growth in health insurance industry with 36% CAGR in its Gross Direct Premium (GDPI) over the last 5 years (FY16:21) compared to Health Industry growth rate of 18% over this period. As a result, Star Health has been improving its market share on YoY basis and now commands a healthy market share of 16% (ex. Travel & PA) in FY21. Strong growth for Star Health is attributable to its leadership in retail health segment, which has grown at a CAGR of 33% over FY19-21 and commands the industry’s highest market share of 31% in retail health segment (ex. Travel & PA) in FY21.

How Star Health Sell Health Policies ?

The company distributes its health insurance policies primarily through individual agents, which accounted for 78.9% of its GWP in Fiscal 2021.

Star Health has robust network with 4.6 Lakh agents as of Mar’21.

Individual agents are the primary method of distribution in the health insurance industry, since health insurance is largely an assisted product in which customers often require help in selecting the policy best suited to their needs and during the claims process.

It also sell policies via Policy Bazar and it has the largest market share of health policies sold on Policy Bazar Platform.

Distribution and Presence of Star Health Insurance

As of September 30, 2021 the distribution network had grown to 779 health insurance branches spread across 25 states and 5 union territories in India. Its existing branches are also supplemented by an extensive network of over 562 Sales Managers Stations (“SMS”), which are small individual service centres, and over 6,892 in-house sales managers, as of September 30, 2021. The other origination channels include distribution by direct online sales through telemarketing and their website, brokers, insurance marketing firms and web aggregators.

Network Hospital?

Generally, if insurance company has large number of hospitals then it is always beneficial of policy holders. If policy holder admit in network hospital then they can avail the cash-less facility and they don’t have to pay anything from the pocket. Star Health has also successfully built one of the largest health insurance hospital networks in India, with 11,778 hospitals as of September 30, 2021.

Impact of COVID-19?

a) Star Health settled 1.5 Lakh covid related claims in FY21.

b) Overall COVID-19 gross incurred claims amounted to Rs1600 Crores.

c) Company incurred a loss of Rs. 825 Crores due to COVID-19

Important Financial Parameters

Particulars (in Cr) FY21 FY20 FY19
Gross Written Premium 9300 6800 5400
No. of Policies Sold (mn) 7 5 4
Number of agents (in mn) 0.4 0.36 0.3
Number of Hospitals 11000 10000 9000
Income from (Insurance Business) -1300 162 35
Income (from Investment) 423 293 195
PAT -877 455 230
ROE -28% 17% 10%

Competitive Strengths
i. Largest and well spread distribution networks
ii. Diversified product suite
iii. Strong risk management

Objects of the Star Health and Allied Insurance IPO:

The Offer comprises of the Fresh Issue and Offer for Sale The Company proposes to utilise the Net Proceeds towards augmentation of its capital base and maintenance of solvency levels. i. To undertake our existing business activities ii. To undertake the activities proposed to be funded from the Net Proceeds.
DRHP of Star Health and Allied Insurance IPO
RHP of Star Health and Allied Insurance IPO

Star Health and Allied Insurance IPO Details:

Open Date: Nov 30 2021
Close Date: Dec 02 2021
Total Shares: 80,544,444
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue
Issue Size: 7,249.18 Cr.
Lot Size: 16 Shares
Issue Price: ₹ 870 - 900 Per Equity Share
Listing At: NSE,BSE
Listing Date: Dec 10 2021

Promoters And Management:

i. Venkatasamy Jagannathan, is the Chairman and CEO of the Company. He holds master’s degree of arts in economics from the Annamalai University. Tamil Nadu. He has more than 47 years of experience in the insurance industry. He has also been awarded the “Social Entrepreneur for Star Cancer Care” award at the Six Sigma Excellence Awards, 2017. He has previously worked with United India Insurance Company in the capacity of chairman cum managing director. ii. Subbarayan Prakash, is the Managing Director of the Company. He holds a bachelor’s degree in medicine and surgery from the Bharathidasan University, Tamil Nadu and a master’s degree in surgery in the branch of general surgery from the Tamil Nadu Dr. M.G.R. Medical University. Further, he has been admitted as a fellow qua surgeon of the Royal College of Physicians and Surgeons of Glasgow. He has also been registered in the Tamil Nadu Medical Register. He has several years of experience as a surgeon and has previously worked with Saudi Operation & Maintenance Company Limited as a specialist in general surgery/traumatology. iii. Anand Shankar Roy, is the Managing Director of theThe Offer comprises of the Fresh Issue and Offer for Sale Company. He holds a bachelor’s degree in commerce from the University of Madras and a post graduate diploma in management from International Management Institute, New Delhi. He has 21 years of experience in the insurance industry and has previously worked with American Express Travel Related Services and ICICI Lombard General Insurance Company Limited.

Financials of Star Health and Allied Insurance IPO:

Particulars (in Millions) Mar 21 Mar 20
Income -10,712 3,607.84
Interest, Dividend & Rent 1,618.21 989.06
Profit on sale of investments 12.93 22.38
Investments written off 195.21
Key Management Personnel Remuneration 685.26 25.7
Donation 0.6 0.6
Interest on NCD 256 256
Profit Related Commission 1.92 5
Late Fees / Penalty 1.15
CSR Expenses 56.21 34.08
Consultancy fees 2.79
Bad Debts Written Off 1.93 4.96
Loss/(Gain) on sale / Discard of Fixed Assets 32.35 -1.31
Operating profit -13,381 2,076.16
OPM % 57%
Other Income 3.22 0.33
Profit Before tax -10,459.50 4,134.25
Profit After Tax -8,256 2,680.02
EPS -16.54 5.48

Comparison With Peers:

As per RHP, ICICI Lombard is shown as peer. (i)  ICICI Lombard GWP = 14000 Crores (FY21) Mcap = 73000 Crores Mcap/GWP = 5.21x (ii) Star Health  GWP = 9300 Crores (FY21) Mcap = 51500 Crores Mcap/GWP = 5.53x

Recommendation on Star Health and Allied Insurance IPO:

Review and Recommendation of Star Health IPO by InvestorZone is 4/10 1. They are the largest private health insurance company in India with leadership in the attractive retail health segment. They are also the fastest growing company in standalone health insurance in India. Growing at 36% CAGR in its Gross Direct Premium in the last 5 years. 2. They have a pan-India distribution network that is one of the largest and well spread in the health insurance industry. 3. Star Health offer a range of flexible and comprehensive coverage options primarily for retail health, group health, personal accident and overseas travel, which accounted for 87.9%, 10.5%, 1.6% and 0.01%, respectively, of the total GWP in Fiscal 2021. 4. Valuation looks very stretched. In March 2021, they allotted shares at Rs. 489 per share and after 6 months the IPO is coming at double price. The valuation is stretched in comparison to ICICI Lombard. The company has shown loss in FY21 and first 6 Months of FY22 due to rise in covid-19 claims.

Lead Manager of Star Health and Allied Insurance IPO:

  1. Ambit Capital Private Limited
  2. Axis Capital Limited
  3. BofA Securities India Limited
  4. Citigroup Global Markets India Private Limited
  5. CLSA India Private Limited
  6. Credit Suisse Securities (India) Private Limited
  7. DAM Capital Advisors Ltd (Formerly IDFC Securities Ltd)
  8. ICICI Securities Limited
  9. IIFL Holdings Limited
  10. Jefferies India Private Limited
  11. Kotak Mahindra Capital Company Limited
  12. SBI Capital Markets Limited

Registrar of Star Health and Allied Insurance IPO:

  1. Kfin Technology Private Limited

Company Address:

Star Health and Allied Insurance Company Ltd No.1, New Tank Street,Valluvarkottam High Road, Nungambakkam, Chennai 600 034 Phone: +91 44 2828 8800 Email: investors@starhealth.in Website: http://www.starhealth.in/

Discussion on Star Health and Allied Insurance IPO:

3 Comments

    Growth is superb…..

    Sector is under-penetrated….

    But………

    Valuation is stretched……

    Reply

    The company is in loss in FY21 due to rise of claims due to covid-19…

    Reply

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