India’s first and largest private standalone health insurance provider, Chennai-based Star Health Insurance, which is backed by ace investor Rakesh Jhunjhunwala and private equity firms Westbridge Capital and Madison Capital, is planning a D-street debut in 2021, sources with knowledge of the matter told Moneycontrol.
The IPO plans of the firm come on the back of a spectacular surge in the demand for health insurance policies and increased penetration post the outbreak of the COVID-19 pandemic.
“Star Health Insurance is growing at a fast clip and has been valued in excess of $3 billion. The firm is planning to raise around Rs 3000 crore via the proposed IPO, though the quantum has not been finalised as yet and a final call will be taken later. As of now, the plan is to file the DRHP (draft red herring prospectus ) with Sebi in May," said one of the persons cited above.
“Kotak Mahindra Capital, Citi, Axis Capital, ICICI Securities and BofA Securities are the investment banks engaged by the firm for the IPO,” said a second person, adding that the kick-off meeting for the listing concluded earlier in the week.
“The key investors in the firm are likely to dilute a minority stake as part of the proposed IPO. It will be a combination of fresh issue of shares and offer for sale,” added a third person.
“Star Health is a good quality firm and will set a strong benchmark. Moreover, there is no listed retail health insurance player in India,” said a senior industry executive who closely tracks the insurance sector. Star Health counts Max Bupa, ICICI Lombard, HDFC Ergo, Bajaj Allianz and New India Assurance as its peers in the segment.
All the four persons spoke to Moneycontrol on condition of anonymity.
Moneycontrol is awaiting an email response from Star Health, Rakesh Jhunjhunwala, Westbridge Capital, Madison Capital, Citi, Kotak and Axis Capital and has sent reminders. This article will be updated when we hear from them. ICICI Securities and BofA Securities declined to comment.
STAR HEALTH INSURANCE: CHANGE IN CONTROL
In August 2018, Safecrop Holdings Pvt. Ltd, a consortium of investors including WestBridge AIF, Rakesh Jhunjhunwala and Madison Capital, signed definitive agreements with the shareholders of Star Health & Allied Insurance Company Ltd to pick up 90 percent in the firm. Back then, the existing shareholders of Star Health included Star Health Investments Pvt. Ltd. and funds managed/ or advised by ICICI Venture, Tata Capital and Apis Partners.
“The management of Star Health has built its leadership position in private health insurance through innovation, perseverance and excellence. I believe health insurance is a key tool for every citizen towards financial stability. I am proud to be associated with Star Health and believe it is best equipped to serve the country’s health insurance needs” Rakesh Jhunjhunwala had said post the acquisition.
THE JOURNEY SO FAR
Star Health, the brainchild of V Jagannathan (who earlier headed United India Insurance) was founded in 2006 and provides health insurance, overseas mediclaim and personal accident policies. As of October 2020, the firm, a market leader in the standalone health insurance segment, had a 52 percent market share.
Its focus area is retail health insurance, where it commands a market share of 30 percent. It is now the country’s fourth-largest private insurer in the non-life space with a market share of 4.36 percent as of August 2020 and a network of more than 9,500 hospitals.
According to its website, it had underwritten a gross written premium of Rs.6865 crore during FY 2019-20 and had more than 12,800 employees and 640 branch offices all over India.
In an interview with Moneycontrol dated October 12, 2020, Anand Roy, Managing Director of Star Health Insurance, said that the company is targeting a premium of Rs 10,000 crore by the end of FY21.
Roy told Moneycontrol that the company had received 45,000 COVID-19 claims worth Rs 500 crore and about 80 percent of them had been settled. He added that Star Health, which had pro-actively started covering COVID-19 cases prior to the regulator IRDAI’s specific directions, had also sold 400,000 Corona Kavach and Corona Rakshak policies
, which are the standard coronavirus-specific covers. Between April and November 2020, the insurer had underwritten gross direct premium of around Rs 5,600 crore. It had sold close to 43 lakh policies as against 30 lakh policies in the same period of the previous fiscal.