Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company shares recorded strong demand in the grey market, trading with double-digit premium on the very first day after setting the price band for its public issue.
The company will launch its initial public offering for subscription on November 30 and the offer will close on December 2. The price band has been fixed at Rs 870-900 per equity share.
Star Health shares are available at a price of Rs 1,050 in the grey market at a premium of Rs 150 or 16.7 percent over the upper price band of Rs 900, as per the IPO Watch and IPO Central.
The grey market is an unofficial trading platform for IPO shares. Generally trading in IPO shares begins with the announcement of the price band and continues till the listing on the bourses.
This will be the 54th initial share sale being launched this year.
The Star Health IPO comprises fresh issuance of shares worth Rs 2,000 crore and an offer-for-sale of 5.83 crore equity shares by selling shareholders, including promoters.
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Promoter Safecrop Investments India LLP will offload the maximum equity shares of over 3.06 crore through offer-for-sale. Konark Trust, MMPL Trust, APIS Growth 6, MIO IV Star, MIO Star, University of Notre Dame DU LAC, ROC Capital Pty Limited, Venkatasamy Jagannathan, Sai Satish and Berjis Minoo Desai will also sell their shares through OFS.
There is a reservation of shares worth Rs 100 crore for the employees.
Star Health, which claimed to be the largest private health insurer in India with a market share of 15.8 percent in the domestic health insurance space in FY21, aims to garner Rs 7,249.18 crore through the public issue at the upper price band, becoming the third largest IPO in terms of issue size in 2021.
The funds, after reducing issue expenses, will be utilised for improving the company’s capital base and maintenance of solvency levels.
Star Health offers a range of flexible and comprehensive coverage options for retail health, group health, personal accident, and overseas travel. It majorly focusses on its retail health and group health segments, which contributed 89.3 percent and 10.7 percent, respectively, to total health GWP in FY21.
In FY21, and the six months ended September 2021, Star Health had a total gross written premium (GWP) of Rs 9,348.95 crore and Rs 5,069.78 crore, respectively.
The retail health market segment is expected to emerge as a key growth driver for the overall health insurance industry in India after the COVID-19 crisis due to low penetration of health cover, high out-of-pocket expenses for healthcare, and since only 10 percent of the population has insurance policies outside of government plans, according to CRISIL Research.
The company, backed by the marquee investor and promoter, primarily distributes its policies through individual agents, corporate agents and banks. As of September 2021, its distribution network had grown to 779 branches across 25 states and 5 Union Territories. It has also built one of the largest health insurance hospital networks in India with 11,778 hospitals as of September 2021.