Star Health Insurance IPO receives poor response from investors, subscribed only 20% in first two days

• Star Health and Allied Insurance IPO has been subscribed only 0.20 times in the first two days of IPO bidding process.
• The health insurer’s IPO is looking to raise ₹7,249 crore through the public issue of shares.
• The grey market premium of the company’s shares rose to ₹15 from ₹10 earlier over the upper price band of ₹900.

Ongoing initial public offering (IPO) of Rakesh Jhunjhunwala-backed Star Health and Allied Insurance has received poor response from investors in the first two days of the bidding process. The health insurer’s IPO has been struggling to get bids for ₹7,249 crore IPO.

Analysts believe shares of the company are priced at expensive valuations and hence recommend avoiding the IPO.

Manoj Dalmia, founder and director at Proficient equities, said that the IPO price is overvalued. He recommended waiting for the last day of the IPO and to invest only if the subscription crosses 100 times.

In line with the weak subscription status, shares of the company are demanding a premium of just ₹15 in the grey market. Although the premium rose to ₹15 from ₹10 earlier over the upper price band of ₹900.

The IPO consists of a fresh issue of shares worth ₹2,000 crore and an offer for sale of 5.83 crore shares by existing promoters and shareholders.

Rajnath Yadav from Choice Broking thinks the IPO could have been cheaper. “At a higher price band of ₹900, Star Health is demanding a market cap-to-net premium earned multiple of 10.3 times, which is at premium to the peer average. Moreover, the demanded valuations are at elevated premium to recent capital issuance,” said the analyst.

The private health insurer has a market share of 15.8% in the Indian health insurance market as of financial year 2021. As of September 30, 2021, it has a distribution network of 779 health insurance branches spread across 25 states and 5 union territories in India.

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