IPO Alert: Star Health files DHRP to raise funds via IPO

The health insurance industry in India is the fastest-growing segment in the non-life insurance segment, registering a CAGR of 23% over the past 10 years. Premiums have grown at a CAGR of 19% in the last 6 years.

Star Health and Allied Insurance Co. Ltd recently filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India to raise funds via an initial public offering.

The IРО consists оf а fresh issue оf ₹2,000 сrоre аnd аn offer for sale (ОFS) оf 60.10 milliоn shares by existing promoters аnd shareholders.

As per applicable IRDAI rules, the company is required to maintain a solvency ratio of 1:50, hence it plans to utilize the net proceeds towards augmentation of its capital base, maintenance of solvency levels and to implement the growth and expansion of business.

Company Profile

Star Health is one of the largest private health insurers in India with a market share of 15.8% in the Indian health insurance market in 2021. The company, the first standalone health insurance company(SAHI) in the country, was established in 2006.

Star Health has registered а tоtаl gross written premium (GWР) оf ₹93.49 billion so far this year. The company’s comprehensive health insurance product suite insured 20.5 million lives in Fiscal 2021 in retail health and group health.

The Chennai-based company has invested in advanced technologies to develop a flexible and integrated information technology platform across its business processes, including omnichannel applications. STAR ATOM and STAR POWER are two such applications for the sales process and customer services.

The company has one of the largest health insurance hospital networks in India, with more than 10,870 units. These agreed network hospitals typically offer better negotiated package-based pricing and the amount of their average claim is lower than those in non-agreed network hospitals.  

Financials

For the year 2021, the company had total revenue of ₹7,405.32 crores against ₹5,453.78 crores a year ago. Net loss for the period stood at ₹825.58 crores versus ₹268 crores a year ago.

Meanwhile, Star Health relies on third-party contractors and service providers for several services. These third parties may fail to operate in compliance with regulations or corporate/societal standards, which could lead to penalties and suffer reputational harm.