Star Health and Allied Insurance Company, which boasts well-known stock market investor Rakesh Jhunjhunwala and his wife as the second-largest stakeholders, is struggling to see its initial public offer (IPO) getting subscribed.
The public issue, which is aiming to raise nearly Rs 7,250 crore, has been subscribed only 55 per cent till 2 pm on Thursday – the last day of the IPO.
To be sure, there have been many instances in the past when public issues got a huge response on the final day of bidding. However, it looks unlikely that the insurance major would be able to register a multiple times oversubscription.
Data from BSE showed that the issue received bids for 2.52 crore shares till 2 pm, as against 4.5 crore shares on offer in the price band of Rs 870 to Rs 900. Employees of the company will get a discount of Rs 80 but the portion reserved for employees has not even been subscribed 10 per cent as yet.
Incidentally, many in the market have said that the issue is quite overpriced with some even suggesting investors to wait for the company to list and then decide on buying the shares.
In a recent report, Choice Broking advised investors to ‘subscribe with caution’ while highlighting the fact that the company issued shares to investors at a “significant discount to the issue price” in the last 6-12 months.
“At higher price band of Rs 900, Star Health is demanding a MCAP-to-net premium earned multiple of 10.3x, which is at premium to the peer average. Moreover, the demanded valuation is at an elevated premium to recent capital issuance. Thus, considering the above observations, we assign a ‘Subscribe with Caution’ rating for the issue,” stated the report.
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, however, believes that the company deserves premium valuations on the back of high growth and healthy profitability.
“Relatively better profitability, with a combined ratio of 92–94 per cent on a steady-state basis, a healthy product suite, a strong distribution network, and management pedigree are moats that call for premium valuations,” stated 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.
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