Star Health IPO struggles to get more subscriptions

Star Health and Allied Insurance Company, which has the well-known stock market investor Rakesh Jhunjhunwala and his wife as the second largest stakeholders, is struggling to get subscribed to its initial public offer IPO.

The public issue, which is aiming to raise more than 7,250 crore, has only 55 per cent until 2 pm on Thursday, the last day of the IPO.

There have been many instances in the past when public issues got a huge response on the final day of bidding. It looks unlikely that the insurance major would be able to register a multiple times oversubscription.

Data from BSE shows that the issue received bids for 2.52 crore shares up to 2 pm, compared to 4.5 crore shares on offer in the price band of Rs 870 to 900. The employee of the company will get a discount of 80 per cent, but the portion reserved for employees has not even been subscribed to a 10 per cent discount.

Many people think the issue is overpriced, with some saying investors should wait for the company to list and then decide on buying the shares.

Star Health is demanding a MCAP-to- net premium of 10.3 x, which is a premium to the peer average. The demand for the demand is at an elevated premium to recent capital issuance. We assign a value to the above observations, therefore, considering the above observations.

In a similar context, Hem Securities recommended subscribing to the issue but with a long-term purpose citing volatile market conditions and valuations. Motilal Oswal Financial Services believes that the company deserves premium valuations because of its high growth and healthy profitability.

A strong distribution network, a strong distribution network and management pedigree are moats that call for premium valuations, according to a report by the domestic broking firm.

Jhunjhunwala and his wife Rekha are the second-largest shareholders in the company with 18.21 per cent stake. Safecrop Investments India LLP is the biggest shareholder with 47.77 per cent stake in the company.