Star Health lists at 6% discount against issue price of Rs 900 a piece

The stock listed at Rs 845, 6 per cent below its issue price of Rs 900 per share on the National Stock Exchange

Star Health and Allied Insurance Company (Star Health) made a weak stock market debut with its equity shares getting listed at Rs 845, a 6 per cent discount to its issue price of Rs 900 per share on the National Stock Exchange (NSE). On the BSE, the stock opened at Rs 848.80, the exchange data shows. Ace investor Rakesh Jhunjhunwala is a promoter of Star Health, which is India's first and largest private standalone health insurance company.

At 10:01 am, the stock was trading at Rs 875.20, after hitting a high of Rs 899 on the BSE in the intra-day trade. On the downside, it hit a low of Rs 827.50 intra-day. On the NSE, the stock hit a high of Rs 895 and a low of Rs 828. A combined 2.6 million shares had changed hands on the NSE and BSE till the time of writing of this report.

Star Health, the largest private-sector health insurance company, got poor response due to expensive valuations, dent in profitability due to Covid-19 and fragile sentiments post a weak listing of Paytm. "The listing was expected to be on a poor note; however, the long-term outlook for the industry and Star Health Insurance is promising. Therefore, we can expect buying interest at lower levels," said Aayush Agrawal, senior Research Analyst - Merchant Banking at Swastika Investmart.

Star Health's Rs 7,250-crore initial public offering (IPO) — the third largest this year and eighth largest ever — had just about managed to sail through despite a poor response from investors, garnering just 79 per cent subscription.

The retail investor quota in the IPO was subscribed 110 per cent. The qualified Institutional Buyers (QIB) portion just about managed to reach the full-subscription mark of 1.03 times. The high networth individual (HNI) portion and employee quota remained undersubscribed at 19 per cent and 10 per cent, respectively.

"Expensive valuations and dent in profitability due to Covid19 were the key concerns for investors. However, the long-term outlook for the company is bullish, thanks to the strong brand name and low penetration of health insurance in India. Investors who applied for this IPO for listing gain can exit, while long-term investors should hold. Investors can wait for some time before comitting fresh money," said Parth Nyati, Founder, Tradingo.

Star Healthcare is the largest retail health insurer in India with a market share of 31 per cent. In the overall health segment, it has a market share of 16 per cent. In the past five years, it has witnessed a gross premium CAGR of 33 per cent and we expect a CAGR of 26 per cent over the next three years, Motilal Oswal Financial Services said in company update.

The industry is highly underpenetrated with 3 per cent of the population covered under retail health scheme. Furthermore, COVID 19 has created a pull for demand for health insurance products. We expect the momentum in demand to sustain over a longer period of time (18-20 per cent CAGR), the brokerage firm said.