The first private equity deal in the Indian health insurance sector is set to be sealed soon.
ICICI Venture is likely to invest Rs 120 crore in Star Health and Allied Insurance Company Limited — the single largest private health insurer in the country — for a 15- 20 per cent stake.
This would value the insurance company at Rs 600-800 crore.
Star Health was seeking capital to meet its solvency margin requirements. At the end of March 2009, solvency margin of the insurer stood at 1.38 per cent against a prescribed limit of 1.50 per cent.
The Chennai-headquartered Star Health is a joint venture between Oman Insurance Company, ETA Ascon group (a business conglomerate in West Asia) and insurance professionals in India.
This would be the maiden investment for ICICI Venture from its new India Advantage Fund 3, which recently mopped up $500 million. South India- based boutique investment banking firm Mape Group is the banker to the transaction.
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When contacted, spokespersons for ICICI Venture and Star Health declined to comment on the issue.
Star Health was the first standalone health insurance company in the country. During the last financial year, Star Health reported a net profit of Rs 7 crore on a premium income of Rs 512 crore.
The insurer saw over two- fold increase in the premium income during 2008-09 from Rs 168 crore in 2007-08.
The Indian health insurance industry has grown at an annual rate of over 35 per cent since the opening of the sector in the year 2000. But the market continues to be significantly under-penetrated in comparison with other countries. Per capita private health insurance in India is estimated at $1.1 in comparison with $2,300 in the US or $63 in Brazil.