Please refer to important disclosures at the end of this report
1
Incorporated in 2006, Star Health and Allied Insurance Company Ltd (Star
Health) is one of the largest private health insurers in India with a market share
of 15.8% in Fiscal 2021. The company primarily focuses on the retail health
market segment. It offers a range of flexible and comprehensive coverage
options for retail health, group health, personal accident, and overseas travel,
accounting for 87.9%, 10.5%, 1.6%, and 0.01%, respectively, of the total Gross
Written Premium (GWP) in Fiscal 2021. As of September 30, 2021, its network
distribution includes 779 health insurance branches across 25 states and 5 union
territories in India. Star Health has also built one of the largest health insurance
hospital networks in India with more than 11,778 hospitals.
Positives: (a) The largest private health insurance company in India with
leadership in the attractive retail health segment (31.3% market share in FY21).
(b) One of the largest and well spread distribution networks in the health
insurance industry and an integrated ecosystem. (c) The diversified product suite
with a focus on innovative and specialized products Scalable. (d) Experienced
Board and senior management team.
Investment concerns: (a) Further impact of the Covid-19 pandemic could
increase claim (b) Any increase in competition could negatively impact the
company’s profitability.
Outlook & Valuation:
Star Health stands out among other standalone health insurers (SAHI) in terms
of size, strong growth rates (32% Gross Written Premium CAGR over FY18-21)
and better operational performance which is reflected in pre-Covid numbers for
the company (~93% combined ratio). The valuations commanded by Star Health
at ~5.5x FY21 Mcap/GWP, are in-line with recent deals in the SAHI space and
appears fair considering its positioning. Hence, we recommend SUBSCRIBE from
a long-term perspective only.
Key Financials
FY2019
FY2020
FY2021
Q1FY21
Q1FY22
5,415
6,891
9,349
3,967
5,070
-
27.2
35.7
-
27.8
3,580
4,693
5,023
2,712
4,660
-
31.1
7.0
-
71.8
165
361
(1,071)
271
(662)
-
119.0
(396.9)
-
(344.4)
128
268
(826)
199
(380)
-
109.0
(408.1)
-
(290.8)
2.2
4.7
(14.3)
3.5
(6.6)
404.0
193.3
-
-
-
42.6
31.8
14.9
-
-
10.5
16.5
(23.7)
-
-
Angel Research; Note: Valuation ratios based on post-issue shares and at
`
900 per share.
SUBSCRIBE
Issue Open: Nov 30, 2021
Issue Close: Dec 02, 2021
Offer for Sale: 5.38cr
share
QIBs 75%
Non-Institutional 15%
Retail 10%
Promoters 58.4%
Public 41.6%
Post Issue Shareholding P attern
Post Eq. Paid up Capital: `574.4cr
Issue size (amount): `7,249cr
Price Band: `870-900
Lot Size: 16 shares
Post-issue mkt.cap: `50,146*– 51,806cr**
Promoter holding Pre-Issue: 66.2%
Promoter holding Post-Issue: 58.4%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue:`2,000cr
Issue Details
Face Value: `10
Present Eq. Paid up Capital: `553.3cr
Amarjeet S Maurya
+022 4000 3600, Extn: 6831
amarjeet.maurya@angelbroking.com
Star Health and Allied Insurance Company Ltd
f
IPO Note |Insurance
November 26, 2021
Star Health and Allied Insurance Company Ltd| IPO Note
November 26, 2021
2
Company background
Incorporated in 2006, Star Health and Allied Insurance Company Ltd (Star Health)
is one of the largest private health insurers in India with a market share of 15.8% in
Fiscal 2021. The company primarily focuses on the retail health market segment.
It offers a range of flexible and comprehensive coverage options for retail health,
group health, personal accident, and overseas travel, accounting for 87.9%, 10.5%,
1.6%, and 0.01%, respectively, of the total Gross Written Premium (GWP) in Fiscal
2021. In FY2021 and the 6 months ended September 30, 2021, they had total
Gross Written Premium (GWP) of ₹9,348.95cr and ₹5,069.78cr, respectively.
The company mainly distributes policies through individual agents and also includes
corporate agent banks and other corporate agents. As of September 30, 2021, its
network distribution includes 779 health insurance branches across 25 states and 5
union territories in India. Star Health has also built one of the largest health
insurance hospital networks in India with more than 11,778 hospitals. Their existing
branches are also supplemented by an extensive network of over 562 Sales
Managers Stations (“SMS”) and over 6,892 in house sales managers.
Issue details
Star Health is raising ₹7,294cr through fresh issue (`2,000cr) and Shareholder
are selling equity share 5.83cr through offer for sale in the price band of ₹870-
900.
Exhibit 1: Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
366,383,000
66.2%
335,552,113
58.4%
Public
186,906,944
33.8%
238,848,942
41.6%
Total
553,289,944
100.0%
574,401,055
100.0%
Source: Source: RHP, Note: Calculated on upper price band
Objectives of the Offer
The IPO aims to utilize the net proceed to augment the company's
capital base and insolvency level.
Star Health and Allied Insurance Company Ltd| IPO Note
November 26, 2021
3
Exhibit 2: Income Statement
Y/E March (` cr)
FY2019
FY2020
FY2021
Q1FY21
Q1FY22
Premium from direct business written
5,415
6,891
9,349
3,967
5,070
% chg
-
27.2
35.7
-
27.8
Premiums earned (Net)
3,580
4,693
5,023
2,712
4,660
% chg
-
31.1
7.0
-
71.8
Other Income
134
192
261
126
270
Total Income
3,714
4,885
5,283
2,838
4,930
Claims Incurred (Net)
2,298
3,087
4,369
1,634
4,111
Commission
264
341
584
302
626
Operating Expenses (Insurance)
987
1,096
1,401
631
854
Operating Profit/(Loss)
165
361
(1,071)
271
(662)
% chg
-
119.0
(396.9)
-
(344.4)
Income from investments
61
101
163
62
160
Other income
0
0
0
2
7
Total Income
226
462
(908)
334
(495)
Provisions (Other than taxation)
4
(3)
34
0
0
Other expenses
40
52
104
18
18
Profit before tax
182
413
(1,046)
317
(513)
Provision for taxation
54
145
(220)
117
(132)
Profit after tax
128
268
(826)
199
(380)
EPS
2.2
4.7
(14.3)
3.5
(6.6)
% chg
-
109.0
(408.1)
-
(290.8)
Source: Company, Angel Research
Star Health and Allied Insurance Company Ltd| IPO Note
November 26, 2021
4
Balance Sheet
Y/E March (` cr)
FY2019
FY2020
FY2021
Q1FY21
Q1FY22
Sources Of Funds
Share Capital
456
491
548
491
553
Share Application Money
350
-
-
-
-
Employee Stock Option Outstanding
-
-
0
-
1
Reserves And Surplus
587
1,153
3,676
1,352
3,765
Fair Value Change A/c – Shareholder
-
1
(3)
3
2
Fair Value Change A/C - Policyholder
-
2
(5)
5
4
Borrowings
250
250
250
250
650
Total
1,643
1,897
4,467
2,101
4,975
Application Of Funds
Investments - Shareholders
952
1,478
2,632
1,842
3,200
Investments - Policyholders
2,078
2,812
4,205
3,763
5,403
Loans
-
-
-
-
-
Fixed Assets
98
102
99
93
116
Deferred Tax Asset
142
147
421
74
549
Current Assets
-
-
-
-
-
Cash And Bank Balances
893
611
1,879
606
878
Advances And Other Assets
709
977
1,265
596
616
Sub-Total (A)
1,602
1,588
3,144
1,202
1,494
Current Liabilities
902
1,179
1,564
1,563
1,567
Provisions
2,492
3,051
5,195
3,310
5,325
Sub-Total (B)
3,394
4,230
6,759
4,873
6,892
Net Current Assets (C) = (A - B)
(1,792)
(2,642)
(3,615)
(3,671)
(5,398)
Miscellaneous Expenditure
-
-
-
-
-
Debit Balance In P&L Account
164
-
725
-
1,105
Total
1,643
1,897
4,467
2,101
4,975
Source: Company, Angel Research
Star Health and Allied Insurance Company Ltd| IPO Note
November 26, 2021
5
Key Ratios
Y/E March
FY2019
FY2020
FY2021
Q1FY21
Q1FY22
Valuation Ratio (X)
P/E
404.0
193.3
-
-
-
P/BV
42.6
31.8
14.9
-
-
Per Share Data (Rs)
EPS
2.2
4.7
(14.3)
3.5
(6.6)
Book Value
21.1
28.3
60.5
31.8
55.6
Returns (%)
ROE
10.5
16.5
(23.7)
-
-
ROA
8.5
15.3
(20.4)
-
-
Operating Ratios (X)
Solvency Ratio
1.5
1.5
2.2
1.5
1.5
Loss Ratio
64.2
65.8
87.0
60.3
88.2
Expense Ratio
23.7
20.9
19.6
21.4
17.9
Commission Ratio
6.4
6.5
8.2
10.2
13.1
Combined Ratio
94.3
93.2
114.8
91.9
119.2
Investment Yield
7.5
7.6
7.1
7.3
9.8
Source: Company, Angel Research
Star Health and Allied Insurance Company Ltd| IPO Note
November 26, 2021
6
Research Team Tel: 022 – 40003600 E-mail: research@angelbroking.com Website: www.angelone.in
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