Rakesh Jhunjhunwala-Backed Star Health IPO Subscribed 20% On Second Day Of Issue

Billionaire investor Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company's share sale via initial public offering (IPO) was subscribed 20 per cent on the second day of its issue, according to subscription data on the stock exchanges.

On Wednesday, the portion reserved for retail individual investors was subscribed by 0.89 times -  the highest among the three groups of investors. The portion set aside for qualified institutional buyers or QIB was subscribe 0.07 times, while the portion reserved for non-institutional investors was subscribed 0.02 times.

The company is selling shares in the price band of Rs 870- Rs 900 per share and a retail investor can bid for minimum one lot of 16 shares up to maximum of 13 lots. At the upper price band, one lot of Star Health shares will cost Rs 14,400. 

''Given its negative earnings, it would not be possible to value the IPO using the PE ratio. At the higher end of the price band, Star Health IPO is aggressively priced at a Mcap/ GWP ratio of more than ~5.50 times. This is higher compared to peer New India Assurance, but lower than ICICI Lombard General Insurance Company. Given superior return ratios and financial performance, ICICI Lombard is expected to command a higher valuation.  

Given the company's strong topline growth, robust outlook due to lower insurance penetration India, leadership position in private health insurance, marquee investors, but steep valuations, we remain ‘positive' on the long-term prospects of the issue. Due to steep valuations, the issue may be a risky bet in the short term," INDmoney said in a report.

Star Health is planning to raise Rs 7,249.18 crore from the IPO which consists of an offer for sale by existing promoters and shareholders worth Rs 5,249.18 crore and fresh issue of Rs 2,000 crore. It is one of the largest private health insurers in India and primarily focuses on the retail health market segment.