Star Health lists at a discount, but ends in the green

The stock listed at ₹848.80 on the BSE but recovered to trade above its IPO price and touched a high of ₹940 during the day. The stock ended 0.8% higher at ₹906.85.

Investor Rakesh Jhunjhunwala, who did not sell any of his stake in the IPO, has made a profit of over ₹6,500 on his initial investment in the company.

Jhunjhunwala held 8.2 crore shares, or 14.98% stake, in Star Health as per the red herring prospectus. It showed Jhunjhunwala bought the insurer’s shares between March 2019 and November 2021 in nine transactions at an average price of ₹155.28 per share, valuing his investment at ₹1,287 crore. At the day’s high of ₹940, his investment in the company was valued at ₹7,791 crore.

The Street was expecting the stock to list at a discount after a tepid response to its IPO – the third-largest issue of 2021. Investors subscribed to 79% of the issue. Following a tepid response to its IPO, the insurer had cut its offer for sale size to ₹4,000 crore from ₹5,249 crore earlier. The IPO was priced between ₹870 and ₹900 per share.

“The valuation was on the expensive side. The market was expecting pricing in the range of ₹750 to ₹800. The IPO coincided with the emergence of the new variant, their ratio of claims could rise substantially if another wave comes,” said Piyush Nagda, head – investment products at Prabhudas Lilladher.

Amarjeet Maurya, AVP – midcaps at Angel One, said a dip in the share price of Star Health would be a buying opportunity for investors who are looking at the company as a long-term investment.

“The company has a strong growth rate of 32% compounded growth in gross written premium in the FY18 to FY21 period and better operational performance which is reflected in pre-Covid numbers for the company,” said Maurya.

“Health insurance is still a very under-penetrated market and Star is doing well in terms of market share and its brand awareness. For long-term investors, it is a value buy,” said Nagda.