India's Star Health trades flat in debut after tepid IPO

[December 10, 2021]  By Shivani Singh

BENGALURU (Reuters) -India's Star Health and Allied Insurance Co, backed by billionaire stock investor Rakesh Jhunjhunwala, see-sawed in a weak debut on Friday, after failing to attract investor interest in a blockbuster year for domestic listings.

Shares of the country's largest private health insurer were down 6% in pre-open trade before reversing course to gain 4.4%. At 0635 GMT, shares were trading flat at 901.40 rupees.

At the day's high of 940 rupees, the Chennai-based company was valued at 66.86 billion rupees ($883.69 million).

Star Health, which offers coverage options for retail health, group health, and overseas travel insurance, witnessed a subdued response to its listing subscription last week and had cut the size of its initial public offering (IPO) to 64 billion rupees from 72.49 billion rupees.

Last month, digital payments start-up Paytm made one of the worst major Indian stock market debuts, raising questions around impending IPOs on the until-now hot Indian market.

Appetite for very large IPOs in India has taken a beating since Paytm's debut rout, though demand for much smaller IPOs from companies with established businesses remained strong.

Relatively smaller firms including KFC and Pizza Hut restaurants operator Sapphire Foods India and data analytics company Latent View have made strong debuts.

Rakesh Jhunjhunwala, Partner, Rare Enterprises, poses after an interview with Reuters in Mumbai, India November 14, 2017. REUTERS/Shailesh Andrade

"Considering the undersubscription of the issue, the flat listing of Star Health was expected. The financial performance was impacted in FY21, but long-term growth prospects of the industry remain quite promising," said Ajit Mishra, vice-president, research, Religare Broking.

The insurer, which saw a significant increase in claims during the resurgence in COVID-19 cases earlier this year, expects to see an impact on its claims ratio for fiscal 2022.

"On the listing day, Star Health and Allied Insurance stock was initially down mainly due to fears of the new Omicron variant as further impact of the COVID-19 pandemic could increase the claims," said Amarjeet Maurya, assistant vice-president, mid-caps, Angel One.

"We are positive on the stock and every dip in share prices provides buying opportunities to long-term investors."

Jhunjhunwala, who owns a near 15% stake in the insurer, did not put up any shares for sale in the IPO.

($1 = 75.6600 Indian rupees)

(Reporting by Shivani Singh in Bengaluru; Editing by Sherry Jacob-Phillips)

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