Star Health IPO is asking for five times the price that Rakesh Jhunjhunwala paid in 2018

• Rakesh Jhunjhunwala had bought 7.68 crore shares for about 14% stake in Star Health at an average price of ₹156.28 per share.
• The company has now set a price band of ₹870-900 per share, which is over five times the price at which Jhunjhunwala bought stake three years back.
• The health insurance company is set to open its IPO on November 30 and close on December 2.
• The company is looking to raise ₹7,249 crore through the public listing of shares.

Between 2019 to 2020, Rakesh Jhunjhunwala bought 7.68 crore shares in eight transactions for a 14% stake in Star Health and Allied Insurance. He bought shares at an average price of ₹156.28 per share.

Now, the company is launching its IPO with a higher price band of ₹900 per share i.e. over five times the price that Jhunjhunwala paid three years ago. The company wants to raise ₹7,249 crore through the IPO.

In the same time, the company’s revenue has grown 74%, however, it reported a loss of ₹825 crore in FY21 for the first time in three years. The pandemic had increased the number of claims leading many insurers to post losses last year.

Now, is the new price justified? Some believe it is. Others are cautious despite being confident of the long-term potential given that only less than five in a hundred Indians have any kind of insurance, and only one of them has non-life insurance, according to data from India Brand Equity Foundation.


Angel One broking firm likes the price as it says the valuations appear fair considering its positioning. “Star Health stands out among other standalone health insurers in terms of size, strong growth rates and better operational performance which is reflected in pre-Covid numbers for the company. The valuations commanded by Star Health are in-line with recent deals in the segment and appear fair considering its positioning. Hence, we recommend ‘subscribe’ from a long-term perspective only,” said the broking firm.

Rajnath Yadav from Choice broking firm 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.

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.

“Star Health stands to benefit from positive industry growth trends given its leadership position in the attractive retail health segment. It has one of the largest and well-spread distribution networks in the health insurance industry and an integrated ecosystem,” said analysts at Religare broking firm.

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