STAR HEALTH INSURANCE IPO – DID THE PANDEMIC HELP THEM?

Covid 19 pandemic has made people more attracted towards health insurance. The pandemic has helped in raising awareness about the need and use for medical insurance. According to a report by MAX BUPA, Before Covid-19 only around 10% of Indians were keen on buying the health insurance but due to the unprecedented situation, it has drastically raised to nearly 71%.

During pandemic health insurance segment has gained a momentum. Health insurance company saw a boom because of the pandemic, amongst them is the star health insurance who made most from the opportunity.The Chennai based health insurance firm is focused more on the retail segment of Health Market and has a retail health Gross Written Premium of Rs. 8215.09 cr. And Rs. 4339.92 cr. In 2021 and the 6 months ended as on September 30, 2021, respectively. It has been ranked 1st in the retail health insurance market in India based on retail health Gross Written Premium (GWP) over the last 3 Fiscal Years, according to CRISIL. The retail segment of Health market is expected to have come up as a key component helping the growth for the overall health insurance industry in India post COVID crisis reason being the low penetration of health insurance and shortage of funds to bear the health care costs and since only 10% of the population has insurance policies outside of government plans, according to CRISIL Research.

The company underwrote a gross written premium of Rs.5401 Crores during the FY 2018–19 and net worth of Rs.1480 Crores, as of 31 March 2019. Currently it has 10,600 plus employees and 550 plus branch offices all over India.

Increased awareness about health insurance with a strong distribution channel has accounted for 40% increase in growth year on year. Managing Director of Star Health Insurance Company, Anand Roy, said “as many people are getting vaccinated and there is very less chances of third wave, which results in the loss ratio will come down to its historical average”. According to September 30, 2021, the company had a market share 15.80% in health insurance and 11,778 network hospitals. Almost 41% of claims, which is worth ₹1,750 crore, settled by the company in the first half of the current fiscal year were related to Covid 19 treatments.

Star Health Insurance, backed by billionaire investor Rakesh Jhunjhunwala, fixed the price band for its IPO at RS 870-900 per share. The IPO was expected to fetch RS 7,249.18 crore at the upper band. This was considered India’s 3rd largest IPO after Zomato and Paytm in 2021.

The company was quite rejected by the individual investors, especially High Net-worth Investors (HNIs), during the book building process. The initial public offering (IPO) of Star Health received 79% subscription and the company was forced to cut down the size of the issue. Its listing on the bourses was also disappointing. Few investors were worried about the company’s loss incurred in the year ended March 2021. In addition, Though the premium collection is on the raise, the claim ratios have also increased due to hospitalization caused by the pandemic, were the possible reasons for weak IPO opening.

Prerana Bharadwaj B P
II MBA , DSCE

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