Star Health makes a tepid debut, lists at 6% discount

Standalone health insurer Star Health and Allied Insurance Co made a tepid debut on the bourses on Friday, listing at a 6 per cent discount over the issue price of ₹900.

The company listed at ₹848.80, down ₹51.20 or a 5.69 per cent from the IPO price. Star Health managed to recover intraday, surging to a high of ₹940.00. It manages to close at a marginal premium of 0.76 per cent over the issue price at ₹906.85. It recorded an intraday low of ₹827.50 

The company’s m-cap stood at ₹52,191.23 crore at closing on the BSE.

On the NSE, it listed at ₹840, down ₹60.00 or 6.67 per cent from the IPO price. It closed at ₹901.00.

All eyes were on the company’s debut as the standalone health insurer had reduced its initial public offering (IPO) size to ₹6,400 crore from its earlier size of ₹7,249 crore after its IPO last week failed to get a subscription fully.

However, merchant bankers had fixed the IPO price as ₹900 a share, at the upper end of the price band of ₹870-900 a share.

It had received bids only for 79 per cent of the issue, forcing promoters to reduce the issue size. 

The offer for sale from selling shareholders and promoters has been reduced from ₹5,250 crore to ₹4,000 crore (to about 4.89 crore shares from the original 5.83 crore shares), according to a document filed with ROC and SEBI. 

However, Rakesh Jhunjhunwala and his wife, who holds over 17 per cent in the company, did not participate in the OFS.

The proceeds from the new issue will be used to augment the company’s capital base.

Long term outlook bullish  

The IPO saw a tepid response from investors owing to high valuations, as per experts. However, the long-term outlook for the industry and Star health insurance seems promising.

According to Manoj Dalmia, Founder and Director-Proficient Equities Limited, the IPO is “overvalued at a price of ₹870-900 per share despite the company suffering losses due to huge claims in pandemic.”

Further, considering its high valuation, one can expect price falls like Paytm, as per Dalmia.

Parth Nyati, Founder, Tradingo, said, “Star Health insurance is debuting the secondary market on a weaker note as expected on the back of a very poor response from the investors.”

“Expensive valuations and dent in profitability due to Covid19 were key concerns for the investors; however, the long-term outlook for the company is bullish thanks to the strong brand name and low penetration of health insurance in India.”

Dr Ravi Singh- Vice President & Head of Research, ShareIndia said, “Taking in view the business parameters, the long term outlook of health insurance sector is positive. Investors may buy at lower levels and keep their holdings for better gains.”

Santosh Meena, Head of Research, Swastika Investmart Ltd said, “Star Health Insurance IPO which is one of the big brands backed by big-name got a very poor response from all categories of investors especially QIB because they didn’t show any interest because of expensive valuations, therefore, we are seeing a poor listing.”

“The long-term outlook for the industry and Star health insurance is promising therefore, we can expect buying interest at lower levels, but it is difficult to say the exact level,” added Meena.