The net premiums increased by 71.8% to Rs 4659.68 crore in H1FY22 from Rs 2712.17 crore in the previous quarter (Q1FY21). Income from investments was Rs 160 crore during H1FY22. The claims incurred increased by 151.5% to Rs 4110.99 crore in Q1 FY22. There was an operating loss of Rs 661.66 crore for Q1 FY22.
The net premium increased by 7% to Rs 4692.99 crore in FY21 from Rs 5022.82 crore in FY20. The claims incurred increased by 41.50% in FY21 as compared to Rs 3087.43 crore in FY20. This was due to the increase in claims incurred due to the pandemic. Income from investments was Rs 163.11crore. Operating losses for FY21 were Rs 1071.21 crore against the profits of Rs 360.78 crore in FY20. This decrease was primarily due to the exceptional expenses incurred in connection with the discontinuance of the VQST reinsurance treaty and the impact of COVID-19 claims paid in FY21.
|Income from investment||160.08||163.11||101.15||61.42|
|Cash Flow from operating activities||-82.18||890.38||647.42||776.41|
The P/E of the Issuer is not ascertainable as the EPS is negative for the last two fiscals. The Issue is priced at 15.56x at NAV of Rs 57.83 per share as at the end of H1FY22, calculated at the upper price band of Rs 900 per share. The peers of the Issuer are ICICI Lombard, New India assurance as per the RHP. The peer comparison table is given below.
|Particulars||ICICI Lombard||New India Assurance||Star Health|
|Face value per share||10||5||10|
|Net profit for FY 21 (Cr)||1,473.05||1,627.75||-825.58|
|NAV per share||163.56||112.17||63.58|
|Return on net worth||19.81%||8.81%||-23.69%|
The Indian health insurance sector is underpenetrated with penetration of only 0.36% of GDP in 2019, compared to the global average of approximately 2.0% of GDP. Demographic factors, including increasing life expectancy and population growth in India, as well as the high portion of out-of-pocket expenses are driving the need and growth of healthcare services. The rising cost of medical care in private hospitals, measures taken by govt. of India and the pandemic has resulted in raising awareness of health insurance in India.
Star Health and Allied Insurance IPO open on 30 Nov amounting to Rs 7249.18 crore (fresh issue Rs 2000 crore) with a price band of Rs 870-900 per share. The Fresh Issue proceeds would be used to augment the Issuer’s capital base and maintain solvency levels. The retail quota for the IPO is 10% and the Issue closes on Dec 2, 2021.
Star Health insurance has a 31.3% retail health insurance market share in FY21 and has the largest number of individual agents.The Issuer’s financial profile has weakened in the last two fiscals due to higher claims incurred in the pandemic. The increase in net paid claims due to the COVID-19 accounted for 30.0% and 41% of the total net paid claims by value in FY21 and H1FY22.
The Issuer faces intense competition in the Indian health insurance market from both public and private-sector competitors. Major public-sector non-life insurers are New India Assurance ,United India Insurance National Insurance and Oriental Insurance. Major private-sector non-life insurers are ICICI Lombard, HDFC Ergo, TATA AIG, Bajaj Allianz and other Standalone Health Insurers are Care Health Insurance, Manipal Cigna Health Insurance, Aditya Birla Health Insurance and Max Bupa Health Insurance. Considering the weak financials, the prevalence of competitive public and private players, one may avoid this IPO.
Review By CA Priyanka Choudhary on 23rd Nov 2021
About CA Priyanka Choudhary
Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.
Email: [email protected]
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.
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