I have full confidence in Star Health management, Rakesh Jhunjhunwala says despite tepid debut today

Star Health IPO | Promoter Rakesh Jhunjhunwala is the second largest shareholder in the company.

Ace investor Rakesh Jhunjhunwala-promoted Star Health and Allied Insurance Company had a disappointing debut on the bourses as the stock listed with a nearly 6 percent discount on December 10. The shares of the company, which were sold at a price of Rs 900 apiece in the initial public offering (IPO), opened at Rs 848.80 on the BSE, reflecting a fall of 5.69 per cent. The issue comprised fresh issue of up to Rs 2,000 crore and an offer-for-sale, and the price band was Rs 870-900 per share.

While the debut was disappointing, the Bug Bull remains optimistic about the insurer. "Health insurance in India is about 15% of the amount spent on healthcare in India or even lesser, I think, while in the advanced countries, over 80% is paid by insurance companies. So, it is a very nascent industry in India," Jhunjhunwala said.

"Star Health dominates the sector with about 31% market share in retail health insurance in India. I think this kind of dominance in an industry which is poised to grow is very rare. So, I will remain optimistic and hopeful and that is why I haven’t sold any shares in the issue," he added.

Jhunjhunwala believes the promoter of an insurance company has a larger role to play. "...as a promoter of an insurance company, I am bound to provide capital adequacy to it. So, the responsibility of being a promoter of an insurance company, goes far beyond the normal role a promoter."

Speaking about the impact of COVID-19 pandemic on the valuations, Jhunjhunwala said that "COVID-19 is once in a lifetime situation and I don’t think it is going to occur again. In my mind I don't think COVID related uncertainties or market volatility has bearing valuations of Star Health, but surely near term factors do effect investor's concept of valuation."

Star Health, a leading private health insurer, is owned by a consortium of investors such as Westbridge Capital and Rakesh Jhunjhunwala. It received a subscription of 79 percent on the last day of the IPO, which closed on December 2. The insurer's offer went through as portions set aside for both Qualified Institutional Buyers (QIBs) and retail investors were fully subscribed. The insurer's offer went through as portions set aside for both Qualified Institutional Buyers (QIBs) and retail investors were fully subscribed.