Star Health & Allied Insurance IPO

Star Health and Allied Insurance Company Ltd is one of the largest  private health insurers in India with a market share of 15.8% in Fiscal  2021. From being the first standalone health insurance (“SAHI”)  company established in India in 2006, it has grown into the largest SAHI  company in the overall health insurance market in India, according to  CRISIL Research.

Company offer a range of flexible and comprehensive  coverage options primarily for retail health, group health, personal  accident and overseas travel, which accounted for 87.9%, 10.5%, 1.6%  and 0.01%, respectively, of their total Gross written premium (GWP) in  Fiscal 2021. Individual agents are the primary distributors of the  company’s health insurance plans, accounting for 78.9% of their GWP  in Fiscal 2021. In addition, the company has successfully built one of  India’s largest health insurance hospital networks, with 11,778 hospitals  as of September 30, 2021. 

⮚ Company consistently ranked first in the retail health insurance  market in India based on retail health GWP over the last three Fiscal Years, according to CRISIL Research. 

⮚ The retail health market segment is expected to emerge as a key  growth driver for the overall health insurance industry in India after  the COVID-19 crisis in India 

⮚ As of September 30, 2021 its distribution network had grown to  779 health insurance branches spread across 25 states and 5 union  territories in India. 

⮚ The company has also successfully built one of the largest health  insurance hospital networks in India, with 11,778 hospitals, of which  7,741 hospitals, or 65.7 percent of the total number of hospitals in  their network, entered into pre-agreed arrangements with in Fiscal  2021. 

Outlook & Valuation: The company has mixed set on financials over the  last three years where the company’s GWP has increased over the years  while the company suffered a loss in FY21. In FY19, the revenues of the  company were Rs 3713 cr while in FY21 it grew to 5283 cr.

The Profit  was at Rs 128 cr in FY19 while the company suffered a loss of Rs 825 cr  in FY21. The health insurance sector is likely to flourish as individuals  become more aware of the benefits of health insurance. If we look at  the company’s financials, we can see that it was doing well until Covid  hit last year. The company has the largest market share which is  positive for the company however the industry is getting competitive.

The valuation of the company is stretched r. At the upper price band of  Rs. 900, Star Health is demanding an MCAP to net premium earned  multiple of 10.3x, which is at a premium to the peer average. Thus, we  assign a “SUBSCRIBE” rating only for the long term.

www.swastika.co.in 

For additional information & risk factors please refer to the Red Herring Prospectus 

IPO Note 

STAR HEALTH AND ALLIED INSURANCE  COMPANY LTD IPO 

KEY MANAGERIAL PERSONNEL  

⮚ Venkatasamy Jagannathan is the Chairman and CEO of the Company. He holds master’s degree of arts in  economics and have more than 47 years of experience in the insurance industry 

⮚ Subbarayan Prakash is the Managing Director of the Company. He has several years of experience as a surgeon  and has previously worked with Saudi Operation & Maintenance Company Limited. 

⮚ Anand Shankar Roy is the Managing Director of our Company. He holds a bachelor’s degree in commerce and he has 21 years of experience in the insurance industry 

⮚ Sumir Chadha is a Non-Executive Nominee Director of the Company he has several years of investing  experience in Indian companies, both public and private. 

⮚ Deepak Ramineedi is a Non-Executive Nominee Director of the Company. He has several years of experience in  the private equity industry 

⮚ Utpal Hemendra Sheth is a Non-Executive Nominee Director of the Company. He holds a bachelor’s degree in  commerce. 

⮚ Rohit Bhasin is an Independent Director of the Company 

⮚ Anisha Motwani is an Independent Director of the Company. 

⮚ Berjis Minoo Desai is an Independent Director of the Company 

⮚ Kaarthikeyan Devarayapuram Ramasamy is an Independent Director of the Company 

⮚ Rajni Sekhri Sibal is an Independent Director of the Company 

⮚ Rajeev Krishnamuralilal Agarwal is an Independent Director of the Company 

COMPETITIVE STRENGTHS 

⮚ Largest private health insurance company in India with leadership in the attractive retail health segment.  ⮚ Largest and well spread distribution network in the health insurance industry. 

⮚ Diversified product suite with a focus on innovation and specialized products.  

⮚ Strong risk management with superior claims ratio and quality customer services.  

⮚ Substantial investment in technology and innovative business processes. 

⮚ Demonstrated track record of operating and financial performance. 

⮚ Experienced senior management team with strong sponsorship. 

KEY CONCERNS 

⮚ Star Health Incurred Claim Ratio has increased from average 63.5% (FY2018 to FY2020) to 94% in FY21 and  91% in Q1 FY22. This is the main reason company has negative revenues and losses in the last 1.5 years. ⮚ The recent Covid-19 outbreak has had a significant impact on the company’s business and operations. ⮚ They were able to keep their market share because of their strong brand name. However, if they fail to keep  such a brand name, their business will suffer. 

⮚ Company can be subject to claims by customers and/or regulators for alleged mis-selling. ⮚ Insurance companies depend on the accuracy and completeness of information provided by customers and  counter parties for pricing and underwriting their insurance policies.  

⮚ Any increase in competition could negatively impact the company’s profitability

www.swastika.co.in 

For additional information & risk factors please refer to the Red Herring Prospectus 

IPO Note 

STAR HEALTH AND ALLIED INSURANCE  COMPANY LTD IPO 

COMPARISON WITH LISTED INDUSTRY PEERS (As on 31st March 2021) 

*ICICI Lombard General Insurance Company Ltd. is not strictly comparable with the Company as they operate under general insurance with health  insurance not forming a significant component, whereas the Company is a standalone health insurance provider. 

FINANCIALS (RESTATED CONSOLIDATED) 

DISCLAIMER: 

The information contained herein are strictly confidential and are meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in  part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika Investmart Ltd. (“SIL”). The contents of this document are for  information purpose only. This document is not an investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of  this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the  Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific  investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment  considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular  circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or  indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information  received by the investor and the investor would be doing so at his/her/its own risk. The information contained in this document should not be construed as forecast or promise or guarantee or  assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past  performances if any, are not indicative of future results. The actual returns on investment may be materially different than the past. Investments in Securities market products and instruments  including in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low risk tolerance. Such  Investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the  information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company. 

Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the  research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our  Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are  inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company.  Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in  connection with the Research Report. 

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Swastika Investmart Limited, SEBI Reg. No. : NSE/BSE/MSEI: INZ000192732 Merchant Banking: INM000012102 Investment Adviser: INA000009843 MCX/NCDEX: INZ000072532  CDSL/NSDL: IN-DP-115-2015 RBI Reg. No.: B-03-00174 IRDA Reg. No.: 713.

www.swastika.co.in 

For additional information & risk factors please refer to the Red Herring Prospectus