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Health insurer Star Health and Allied Insurance Co Ltd, owned by a consortium of investors including Rakesh Jhunjhunwala and Westbridge Capital, on Thursday filed a draft red herring prospectus with Securities Exchange Board of India (Sebi) to raise capital through an initial public offering.

The IPO consists of a fresh issue of Rs2,000 crore and an offer for sale of 60.10 million shares by existing shareholders of the company.

Collectively, the IPO size is expected to be as much as Rs7,500 crore (around $1 billion), said a person aware of the company’s fundraising plans, speaking on the condition of anonymity.

Founded in 2006 as India’s first standalone health insurance provider, Star Health provides health, personal accident and overseas travel insurance.

The investor consortium of Westbridge Capital, Rakesh Jhunjunwala and Madison Capital, had in August 2018 agreed to acquire over 90% stake in Star Health from existing investors Star Health Investments Pvt. Ltd and private equity funds managed by ICICI Venture, Tata Capital and Apis Partners.

The offer for sale in the proposed IPO will see a sale of upto 30.68 million shares by Safecrop Investments India LLP, upto 1.38 lakh shares by Konark Trust, upto 9518 shares by MMPL Trust, upto 7.68 million shares by Apis Growth 6 Ltd, upto 4.11 million shares by Mio IV Star, upto 7.44 million shares by University of Notre Dame DU LAC, upto 4.11 million shares by Mio Star, upto 2.51 million shares by ROC Capital PTY Ltd, upto 1.47 mln shares by Venkatasamy Jagannathan, upto 1.8 mln shares by Sai Satish and upto 144000 shares by Berjis Minoo Desai.

The proceeds from the fresh issue of shares of Rs2,000 crore will be deployed towards augmentation of its capital base. According to IRDA norms and regulations, the firm is required to maintain a minimum solvency ratio of 1.50. As of March 2021 its solvency ratio was 2.23.

The proposed IPO will make Star Health the fourth private sector insurance provider to list on Indian stock exchanges, following HDFC Life Insurance Co. Ltd, ICICI Prudential Life Insurance and ICICI Lombard General Insurance. Other listed insurance companies include SBI Life Insurance and state-owned The General Insurance Co. of India and New India Assurance Co. Ltd.

Kotak Investment Banking, Axis Capital, Bofa Securities India, ICICI Securities, Ambit Pvt Ltd, DAM Capital Advisors and others are advising the company on the IPO.

The company is the largest private health insurer in India with a market share of 15.8% in the Indian health insurance market in Fiscal 2021. As of fiscal year 2021 it had a total Gross Written Premium (GWP) of 93.49 billion.

It offers a range of 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 its total GWP in Fiscal 2021. For FY21, it issued 7 million health insurance policies. Since inception till date, it has processed approximately 6 million claims.

The company said it has seen a significant increase in claims across its network, in particular most recently during the resurgence in COVID-19 cases in April and May of 2021, which it expects may have an impact on its net Incurred Claims Ratio and our solvency ratio for Fiscal 2022.

The firm settled and paid 0.15 million claims related to COVID-19 amounting to gross paid claims of Rs1528.64 crore as of March 2021. Outstanding COVID 19 claims amounted to Rs110.35 crore.

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