Star Health Insurance promoters too head for the exit door

Star Health Investments, which owns close to 40% of Star Health Insurance, seeks to cash out in the wake of a slew of insurance IPOs


Mumbai: Star Health Investments Pvt. Ltd, the promoter of Star Health and Allied Insurance Co. Ltd, is looking to exit India’s first and largest standalone health insurance firm, seeking to cash out in the wake of a slew of initial public offerings (IPOs) in the insurance sector, three people aware of the matter said.

Star Health Investments, which owns close to 40% of the insurance firm, joins other investors such as ICICI Venture Fund Management Co. Ltd and Sequoia Capital in trying to monetize their investment in Star Health Insurance.

The Economic Times first reported on 9 February that these shareholders wanted to exit.

On 4 August, Mint reported that Star Health Insurance was looking to raise up to Rs3,000 crore in funding through primary and secondary stake sales.

“As you are aware…these are natural processes in any growing company. I can only say that the company and its current management team will continue to serve the public,” said V. Jagannathan, chairman and managing director of Star Health Insurance. Jagannathan, also spokesperson for Star Health Investments, refused to elaborate further.

Shareholders of Star Health Investments include Sequoia Capital-owned Snowdrop Capital Pte Ltd. (43.71%) and a clutch of Chennai-based individuals, according to Registrar of Companies data.

Apart from Star Health Investments’s close to 40% stake in Star Health and Allied Insurance, ICICI Venture and Tata Capital Ltd hold close to 20% each. Apis Partners LLP, Alpha TC Holdings Pte. Ltd and others hold the rest.

ICICI Venture, Sequoia Capital, Tata Capital and Apis Partners declined to comment. Alpha TC and other shareholders did not respond to emails and calls seeking comment.

Two weeks ago, bankers sent an alert for a confidentiality agreement to existing domestic general insurers for exploring the option of a potential merger with Star Health Insurance recently, the three persons cited above said on condition of anonymity.

Kotak Mahindra Capital Co. Ltd has been appointed as the investment banker for shortlisting new promoters and public shareholders for Star Health Insurance. Kotak Mahindra did not respond to an email seeking comment.

“…considering the competition and the scope of penetration, capital infusion will be crucial for health insurers in the coming days for strengthening the network further and employing better technology to service customers’ needs,” said Shashwat Sharma, partner and head of insurance at KPMG India.

“So, along with strategic partners, having serious investors, too, will be important for health insurance firms,” he added.

The process for the proposed stake sale has just begun, said two of the people cited above. Star Health investors are looking at a valuation of Rs7,000 crore, about 35 times the firm’s expected profit for the current fiscal.

In comparison, ICICI Lombard General Insurance Co. Ltd trades at around 40 times its expected profit in the year ahead. Star Health and Allied Insurance’s gross direct premium underwritten increased 40% to Rs1,558.36 crore in the April-September period. The company reported a profit of Rs118 crore for financial year 2017, which is about 14% lower than Rs136 crore in the previous financial year.

Last week, in an interview with Mint, Housing Development Finance Corp. Ltd (HDFC) chairman Deepak Parekh, the Indian promoter of non-life insurance firm HDFC Ergo General Insurance Co. Ltd, said the promoters had received a proposal from Kotak for Star Health Insurance. He did not elaborate.

The insurance sector has been on a fund raising spree. In September last year, ICICI Prudential Life Insurance Co. Ltd raised Rs6,057 crore through an initial public offering and became the first Indian insurer to be listed.

Last month, SBI Life Insurance Co. Ltd raised Rs8,400 crore through an IPO. ICICI Lombard General Insurance Co. Ltd, and state-run General Insurance Co. Ltd and New India Assurance Co. Ltd have also raised money through initial public offerings.


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