Niva Bupa Gets 'Buy' As Motilal Oswal Initiates Coverage, Sees 29% Upside

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Motilal Oswal Report

We believe Niva Bupa Health Insurance Company Ltd. has a strong position to harness the growth opportunity in the health insurance industry, backed by product innovation and customer base expansion. Investments in technology will give results in terms of operational efficiency and better profitability.

Excluding the 1/n impact, we expect Niva to report FY25-28E gross written premium/PAT CAGR of 25%/32%. While the claim ratio is expected to rise with scale, operational efficiency will offset the impact, leading to a pre-1/n combined ratio of 93.4% in FY28 (from 98.8% in FY24).

On IFRS basis, we expect a CAGR of 27%/34% in insurance revenue/PAT over FY25-28.

We initiate coverage on the stock with a target price of Rs 100, based on 40x FY27E P/E on IFRS PAT.

Key downside risks:

High competitive intensity – The Indian health insurance sector has several SAHIs, general insurers and new-age InsurTech players vying for market share, increasing pricing pressure.

Highly regulated industry – IRDAI’s intervention in product structures, pricing, claim settlement, etc. can impact profitability and innovation.  Fraud incidences by customers and hospitals – Inflated claims, falsified medical reports and hospital insurer collusion are significant challenges.  Healthcare inflation – Annual cost increases in hospitalization, diagnostics and treatments can lead to higher claim payouts.

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