Star Health IPO struggles to get subscribed, mops up only 20% by Day-2 end

Not even a single domestic institutional investor has applied for the IPO so far, data disclosed by stock exchanges shows

Star Health and Allied Insurance Company’s IPO is struggling to garner bids for its Rs 7,250-crore, the eight biggest in the domestic market. The offering was subscribed 20 per cent on Wednesday, a day before its close.

Bulk of the bids in any IPO came on the final day, however, the subscription patterns suggest the country’s largest private health insurer could struggle to reach the 100 per cent subscription.

For one, not even a single domestic institutional investor (DII) has applied for the IPO so far, data disclosed by stock exchanges shows. Majority of the bids have come from retail investors, who have only a 10 per cent quota in the IPO as against 35 per cent.

Star Health company has already allotted shares worth Rs 3,217 crore to anchor investors. In the anchor segment, only one mutual fund (MF) applied--Edelweiss MF, who applied for less than Rs 15 crore worth of shares.

Majority of the bids in the anchor category came from global funds such as Government of Singapore (allotment of Rs 250 crore), The New Economy Fund (Rs 223 crore) and Baillie Gifford (Rs 250 crore).

Star Health’s IPO comprises Rs 2,000 crore fresh fund raise and an offer for sale worth nearly Rs 5,250 crore.

Analysts said DIIs are giving the IPO a miss as they think the valuations are expensive.

“Considering September 30, 2021, adjusted book value per share of Rs 90.35 on the post-issue basis, the company is going to list at a price-to-book of 9.96 times with a market cap of Rs 51,796 crore. Its peers ICICI Lombard and New India Assurance are trading at P/B of 8.25 times and 0.71 times, respectively. We assign an ‘avoid’ rating to this IPO as the issue is expensive as compared to its peers,” said a note by Marwadi Shares and Finance.

Under the Sebi rules, at least 90 per cent subscription is required for the IPO to be successful. An investment handling the IPO said they are confident that the issue will get full subscription on the last day.