Star Health ends in green, albeit by a small margin, despite IPO drubbing

Stock ends at Rs 907, a gain of Rs 7 over issue price of Rs 900. Shares hit a high of Rs 940 and a low of Rs 827.5 on BSE

Rakesh Jhunjhunwala-promoted Star Health and Allied Insurance Company ended above the issue price during its first trading day on Friday. This despite a cold response to its initial public offering (IPO) earlier this month, which forced the company to reduce the issue size from Rs 7,250 crore to Rs 6,400 crore. Star Health is India’s first and largest standalone health insurance company.

Its stock ended at Rs 907, a gain of Rs 7 over issue price of Rs 900. The shares hit a high of Rs 940 and a low of Rs 827.5 on the BSE.

Its IPO had managed to garner just 79 per cent subscriptions. Due to which the selling shareholders had to settle for lower dilution.

Nearly 90 per cent from institutional investors in the IPO had come from overseas investors. Mutual funds didn’t even bid for a single share in the IPO.

Analysts said the expensive valuation vis-a-vis its listed peers and rise in insurance claims post-pandemic are the main reasons for the lack of investor enthusiasm for the IPO. Star Health’s price-to-book (P/B) is 10 times. Private sector peer ICICI Lombard trades at a P/B of 8.25 times.

Further, with Omicron cases going up, the company’s losses may extend to the next financial year, said analysts.

The tepid response to the IPOs of Paytm and Star Health signals the waning enthusiasm for loss-making companies with rich valuations. Pharmacy chain Medplus Health Services, which launches its IPO next week, has reduced its IPO size.

Star Health IPO comprised Rs 2,000 crore fresh fundraise and an offer for sale by 11 entities, including Safecrop Investments India, Apis Growth, University of Notre Dame and Mio Star.

JhunJhunwala did not divest any stake in the IPO. The ace investor’s stake in the company is valued at around Rs 7,500, making Star Health his second-most valuable stock in his portfolio after Titan.