Star Health IPO listing day strategy: Premium listing unlikely at this valuation; should you sell, hold, buy?

Rakesh Jhunjhunwala-backed Star Health shares may get a weak listing on stock exchanges today amid high valuation concerns, after muted response to the IPO last week.

Star Health IPO now consists of a fresh issue of Rs 2,000 crore and an OFS of up to 48.89 million shares.

By Harshita Tyagi

Rakesh Jhunjhunwala-backed Star Health shares may get a weak listing on stock exchanges today amid high valuation concerns, after muted response to the IPO last week. Even so, analysts advise that investors exit the stock and re-enter at lower levels. Star Health failed to get full subscription for its Rs 7,249-crore IPO — the second largest this year after Paytm.It later cut the offer for sale (OFS) size to Rs 4,400 crore from Rs 5,249 crore earlier.

Star Health IPO now consists of a fresh issue of Rs 2,000 crore and an OFS of up to 48.89 million shares instead of 58.32 million shares planned earlier by its promoters and existing shareholders. Safecrop Investments India LLP is now selling 29.85 million shares instead of 30.68 million shares earlier planned.

Star Health IPO Grey Market Premium

A day before market debut, Star Health shares in the grey market were quoting at a discount of Rs 60 on Thursday, on the IPO price band of Rs 875-900.

Premium listing unlikely

Analysts expect Star Health shares to get a weak listing as the valuation seems too high at the offer price of Rs 875-900, while covid uncertainties still loom over the business.

Amarjeet Maurya, AVP, Research, Angel One: “We expect a slightly weak listing due to new covid variant omicron (further impact of the Covid-19 pandemic could increase claim). Even if it lists at a premium, then investors must wait for correction, and buy on dip. We are positive on the stock for a long term period, in both scenarios.”

Umesh Paliwal Co-founder of InvestorZone: “Pricing seems to be problematic. They have issued shares six months back at Rs 487 per share and now coming at such high IPO Price. Plus, due to Covid-19, they have settled large claims and because of that they incurred huge losses in FY21 and first six months of FY22. With new covid strain in the world, sentiments are not good for stock. Chances of Star Health shares listing at premium are very slim. However, even if it lists at premium, investors should sell it, book profit and enter at 600-650 levels. New investors are also advised to enter at 600-650 levels.”

Aayush Agrawal, Sr Research Analyst, Merchant Banking, Swastika Investmart: “Star health insurance, the largest private-sector health insurance company gets poor response due to expensive valuations, dent in profitability due to covid19 and fragile sentiments post a weak listing of Paytm. The listing is expected on a poor note however the long-term outlook for the industry and Star health insurance is promising therefore we can expect buying interest at lower levels.”

Buy Star Health shares for long term

Amarjeet Maurya, AVP, Research, Angel One: “We are positive on stock for the long term on the back of strong growth rates (32% Gross Written Premium CAGR over FY18-21) and better operational performance which is reflected in pre-Covid numbers for the company (~93% combined ratio).”

Umesh Paliwal Co-founder of InvestorZone: “Star Health has grown phenomenally well in the last 3 years and the scope of growth is huge, as the health insurance market is quite under penetrated and Covid-19 has triggered people buying health insurance. Currently, they have Gross Written Premium of Rs 9,000 crore.”

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