| Issue Size- 81,429,127- 80,654,848 shares | Issue Open/Close – Nov 30/Dec 02, 2021 |
| Price Band (Rs) 870-900 | Issue Size- Rs 70.74-72.49 bn |
| Face Value (Rs) 10 | Lot Size (shares) 16 |
Incorporated in 2006, Star Health and Allied Insurance Company (Star Health) has grown into the largest standalone health insurance company in India with a market share of 15.8 pct. Its comprehensive health insurance product suite insured 20.5 million lives in FY21 in retail health and group health, which accounted for 89.3 pct and 10.7 pct, respectively, of its total health gross written premium (GWP). It distributes its health insurance policies primarily through individual agents, which accounted for 78.9 pct of its GWP in FY21. 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. Its total number of individual agents grew at a CAGR of 27.3 pct from 0.29 million as of FY19 to 0.46 million as of FY21 and was 0.51 million as of September 30, 2021. Its distribution network has 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, which are small individual service centres, and over 6,892 in-house sales managers. It has also successfully built one of the largest health insurance hospital networks in India, with 11,778 hospitals as of September 30, 2021.
Key positives
- Star Health stands out among other standalone health insurers in terms of size, strong growth rates (32 pct Gross Written Premium CAGR over FY18-21) and better operational performance which is reflected in pre-Covid numbers for the company (~93 pct combined ratio).
- The largest private health insurance company in India with leadership in the attractive retail health segment (31.3 pct market share in FY21).
- One of the largest and well spread distribution networks in the health insurance industry and an integrated ecosystem. The diversified product suite with a focus on innovative and specialized products Scalable.
- Experienced Board and senior management team.
- Star Health has also successfully built one of the largest health insurance hospital networks in India, with more than 11,778 hospitals as of September 30, 2021. Out of the total number of hospitals in their network, they have entered into pre-agreed arrangements with over 7,741 hospitals, or 65.7 pct, of the total number of hospitals in their network.
- Because of pandemic, awareness of the health insurance is at the peak. Star Health being a dominant player focusing on the retail health insurance is well placed to benefit from the expansion in the market.
- Going forward, the company intends to enhance its market leadership by leveraging its strong brand. It aims to enhance existing distribution channels and develop alternative channels. It also intends to focus on product innovation and provide value-added services.
Risks
- Further impact of the Covid-19 pandemic could increase claim
- Increase in competition
Valuation
Star Health and Allied Insurance Ltd. is a play on structural health insurance opportunity. It is the largest private health insurance company and the largest retail health insurance company in India by health GWP, with a 15.8 pct overall health insurance market share and a 31.3 pct retail health insurance market share in fiscal 2021. It is suffering severe setbacks since the pandemic and fared poorly for FY21 and H1FY22. Due to negative earnings, its PE cannot be ascertained. At the issue price band, the valuations commanded by Star Health at ~5.5x FY21 Mcap/GWP. Looking at the risk aversion in the broader markets, we Suggest an AVOID as of now. We will take a fresh view post listing.
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