Star Health IPO offers an opportunity to invest in a standalone health insurance company (SAHI) that benefits from strong industry prospects.
Sunil Shankar Matkar
December 02, 2021 / 09:35 AM IST
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Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company, the largest private health insurer and the largest retail health insurer in India, has floated a Rs 7,249-crore public issue at a price band of Rs 870-900 per share.
Star Health has one of the best operation performances as against other standalone health insurance (SAHI) companies and solid return ratios, says Amarjeet Maurya, AVP, mid-caps at Angel One. “We would recommend investors to subscribe to this IPO from a long-term perspective,” he says in an interview with Moneycontrol.
“On the subscription, it is difficult to comment on the potential subscription levels, but the issue should see good subscription levels nonetheless,” he says. Excerpts from the interview:
Why should one go for Star Health IPO in the current equity market conditions? What is your advice to investors?
Star Health offers an opportunity to invest in a standalone health insurance company (SAHI) that benefits from strong industry prospects. As far as the fundamentals are concerned, the company has one of the best operation performances as against other SAHI companies and solid return ratios. We would recommend investors to subscribe to this IPO from a long-term perspective.
Do you think the issue is rightly priced, considering the current equity market environment and disappointing Paytm listing?
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Comparing this company with other listings is not fruitful as the fundamentals at play are different. Considering the deals that have happened in the SAHI space over the past few years have been similar in terms of market cap/GWP (gross written premium), we believe that the IPO is priced reasonably with investors having the ability to ride the high growth in gross written premiums.
Valuations are comparable with other listed, highly profitable, general insurer which has similar GWP growth.
What are the risks one should consider before subscribing to Star Health IPO?
The impact of the COVID pandemic was evident in Star Health’s case as it affected the loss ratio and overall profitability. Further waves or variants could increase the number of claims. Additionally, an increase in competition could also negatively impact the company’s profitability.
Also read – Star Health and Allied Insurance Company IPO – Should you subscribe to it?
Do you think the name of ace investor Rakesh Jhunjhunwala as a promoter of the company will help the issue get a strong subscription or the current market environment will impact subscription figures?
Of course, having a reputed ace investor as a promoter can only help the issue sail through successfully but it is difficult to rely on it completely in the current environment. Similarly, it is difficult to comment on the potential subscription levels, but the issue should see good subscription levels nonetheless.
What are your thoughts on Star Health financials reported so far?
Given that the impact of COVID on the overall industry, the company’s performance is along the expected lines but before the outbreak, Star Health stood out against its SAHI peers in terms of its size, overall growth, and strong operating/underwriting profitability.
Also read – Star Health IPO: 10 key things to know before subscribing public issue
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
