Star Health Insurance: The Indian insurance sector in India for long existed with only one dominating player i.e. LIC. As time progressed new private players have joined in.
Currently, the insurance industry of India has 57 insurance companies 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.
Since the emergence of the Covid 19 In March 2021, health insurance companies in the non-life insurance sector have increased by 41%, driven by rising demand for health insurance products amid the COVID-19 surge.
This provided a sectoral boost and improvement in the growth prospects for the insurance players planning to capitalize on this momentum.
In this article, we are going to cover the constant fall in the prices of Star health insurance and the events that led to it.
About Star Health Insurance IPO
Star Health and Allied Insurance raised Rs 7,249 crore at an issue price of Rs900 per equity share. From an investor perspective, the company was aggressively priced.
As the company has posted losses in the last 18 months. Hence the PE cannot be ascertained due to the negative earnings.
Despite having Rakesh Jhunjhunwala on their promoter side, Star Health and Allied Insurance IPO had a lukewarm response from investors.
On Dec 10, 2021, their shares opened at a discount of 6% but recovered in the intraday to reach the high of Rs 940 and closed just above the issue price.
But the share has never reached the same height since then!
What’s The Lop Side?
Rakesh Jhunjhunwala having the 14.98% stake in the company earned Rs 5,418 crore or 421% profit from his investment in the Star Health and Allied Insurance Company.
As the big bull had an average purchase price of Rs 155.28 per share which was made prior to the IPO. While the retail investors are still looking for a way out of the deal that went bad for them.
A Deal Went Bad Or Opportunity In Disguise
Since listing the Star Health and Allied Insurance Company has shown a constant fall. Currently, the stock is already down over 22 percent, showing no signs of recovery.
Day by day Star Health is joining the likes of last year’s disappointments of Zomato, Nyka, Paytm, etc.
Big Bull’s Views On Star Health
Rakesh Jhunjhunwala has already made his stance clear by not liquidating his holdings after the staggering gains in the IPO. This shows his intent to stay invested for the long term.
He believes profitability is the key to growth. Therefore, with good leadership and being the dominant player in the insurance space, the objective should be to turn around this parameter in the company’s favor.
The ace investor has also further increased his stake to 17.5% in January showing his bullishness over the stock.
What Future Holds For Star Health?
Looking at the current scenario, the Insurance sector seems to have promising growth. These prospects are linked to opportunities due to existing penetration in major fragments of areas.
This presents a favorable scenario for the Star Health and Allied Insurance Company. The company already dominates the sector through its large distribution networks.
Star Health and Allied Insurance Company are also more focused on majorly serving the public offline via agents giving it accessible penetration to remote areas.
Star Health and Allied Insurance Company have faced the issue of overvaluation which was later corrected by the market.
What About Retail Investors?
Since the start of the year, retail investors have already taken hits in the form of the liquidity crunch, Ukraine-Russia crisis. These externalities have added to the already bearish trend.
Some investors panicked with some exiting the markets, this also presents an opportunity to buy “quality” stocks at dips. Last year came with a bullish trend and was later joined by overvaluations.
But now constant fall in the market presents an opportunity for the accumulation of quality stocks. The Star Health and Allied Insurance company could also turn out to be one of these stocks.