Star Health and Allied Insurance shares list at discount to IPO price, fall over 5% on debut trade

Star Health and Allied Insurance Company shares listed on the stock exchanges today at a discount to IPO price. The stocks began trading at Rs 848 per share, down 5.69%.

Star Health and Allied Insurance IPO was not fully subscribed by investors. (Image: REUTERS)

Star Health and Allied Insurance Company shares listed on the stock exchanges today at a discount to IPO price. The stocks began trading at Rs 848 per share, down 5.69% or Rs 51.2 per share from the issue price of Rs 900 per equity share. Minutes into the initial day of trade, the stock trimmed losses and was seen moving higher, inching closer to the issue price. The weak listing was on expected lines after the IPO failed to attract interest from investors during its three-day initial share sale earlier this month. Star Health is backed by ace investor Rakesh Jhunjhunwala who owns a 14.98% stake in the private insurance company. On listing, Star Health and Allied Insurance Company had a market capitalization of Rs 48,850 crore.

“On the listing day, Star Health and Allied Insurance Company stock is down ~2% mainly due to fear of new Covid variant omicron. However, Company has strong growth rates. We are positive on stock and every dip in share prices provides buying opportunities to long term investors,” said Amarjeet Maurya, AVP, Research, Angel One. On the other hand Ravi Singhal, Vice Chairman of GCL Securities said that allottees should book loss at current levels as weak listing was widely expected. “The public issue was offered at around 15 to 20% higher valuations and hence the share price of the newly listed insurance stock may further go down. One should take fresh position in the counter at around Rs 725 to Rs 750 levels for 6 months target of Rs 1000 to Rs 1100 keeping stop loss at Rs 640 levels,” he added.

The Rs 7,249 crore IPO had seen a muted response from investors on  Dalal Street, failing to raise the said amount. Qualified Institutional Buyers (QIB) had bid for 1.03 times the IPO size reserved for them while the Retail portion of the issue was subscribed to 1.10 times. However, Non-Institutional Investors (NII) and employees of the firm did not subscribe their portion of the IPO completely. 

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

Analysts had raised red flags around the valuations demanded by the company. “At the higher price band of Rs. 900, Star Health is demanding an MCAP-to-net premium earned multiple of 10.3x, which is at a premium to the peer average. Moreover, the demanded valuations are at an elevated premium to recent capital issuance,” analysts at Choice Broking had said earlier. Star Health is one of the largest private health insurers in India with a market share of 15.8% in the fiscal year 2021. The company primarily focuses on the retail health market segment. It offers a range of flexible and comprehensive coverage options for retail health, group health, personal accident, and overseas travel. 

The company saw its profitability getting hit during the covid-19 pandemic impacted by higher claims. Start Health and Allied Insurance reported an operating loss of Rs 1,071 crore in financial year 2020-21 as compared to a profit of Rs 360.8 crore and Rs 164.7 crore in fiscal year 2019-20 and 2018-19. 

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