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MUMBAI : Star Health and Allied Insurance Co. Ltd is targeting a bullish valuation of about 50,000 crore for its upcoming initial share sale on hopes that investors will bet on its future growth prospects amid a covid-induced spurt in demand for health insurance.

The valuation is a sharp rise from 2018 when private equity firm Westbridge Capital and billionaire investor Rakesh Jhunjunwala’s Rare Enterprises jointly purchased a 90% stake in the company for 6,000 crore.

Founded in 2006 as India’s first standalone health insurance provider, Star Health provides health, personal accident, and overseas travel insurance. The initial public offering (IPO) is slated to open on 30 November and close on 2 December.

The weak public listing of Paytm has caused an uproar on social media on IPO pricing and valuations of companies as the financial services company’s stock plunged almost 37% in the first two days of listing.

Star Health, however, believes that new investors will find the valuation “very comfortable" given the company’s growth prospects, its business model and market position.

“The valuation has been arrived at scientifically looking into various factors. Definitely we believe this valuation will be very comfortable for the new investors also. But we are more focused on the long term growth and we believe that we’ll be able to deliver the results in the long term," said Anand Roy, managing director, Star Health in an interview.

“Our business is totally different. It’s all built on strong fundamentals and solid growth. Our performance has been analysed by a good number of investment bankers and analysts and we had various levels of discussions with 150-plus investors during the roadshow and on a proper comparison and benchmarking with other listed players in the market we have arrived at this valuation," said S. Prakash, managing director, Star Health.

The insurer has set a price band of 870-900 a share for the IPO. The share sale comprises a fresh issue worth 2,000 crore and a secondary sale of 58.32 million shares by existing shareholders.

The spurt in business seen due to covid-related policies has started to ebb, but the company is seeing new opportunities that it expects will drive strong growth in the medium term, according to the company.

“Our business continues to grow at close to 27% on a year-on-year (y-o-y) basis. The covid specific policies, which were in high demand last financial year, are not there this year. To that extent, there has been muted growth on the hyper demand that happened last year," Roy said. 

“However, we are also witnessing new areas of growth. For example, in the younger age group, we are seeing a lot of demand coming from the semi- urban and rural markets. These are new areas that have opened up for us and we are well poised to capture these demand segments, which we are working on very aggressively," he added.

Star Health expects to maintain above industry growth rates, on the back of favourable tailwinds for the insurance sector following the pandemic.

“The penetration of health insurance is very low in India and this pandemic has opened up everyone’s thoughts about having health insurance coverage of their own. I think we are well placed to capture that opportunity. Given that scenario, we should be able to maintain our higher than industry growth rate in the medium term also," Roy said. The company is continuing to double down on its core retail segment and also plans to augment its growth by expanding its distribution network.

“We will expand our distribution channels. We are a little behind others as far as bancassurance is concerned. So, we will focus on improving our bancassurance distribution, our digital distribution that is on our websites and partnerships with fintech companies. These are the areas we are looking at very aggressively, apart from the agency business which remains the mainstay of our business model," Roy said.

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