Fund managers, who spoke on condition of anonymity, said mutual funds are uncomfortable with the valuations that the company is asking for in the IPO.
“The valuation is too expensive because Star was valuing itself on the basis of gross premium collected,” said a senior mutual fund industry official. “When the business should be valued on the basis of its risk assessment capability, which is essentially profits, how can a company be valued on the premium collected.”
Fund managers said mutual funds had raised concerns about rich valuations in the company’s IPO roadshows. Star did not respond to an ET query.
Star Health’s issue was subscribed 12 per cent on the first day of bidding on Tuesday. While the retail portion saw bids for 64 per cent, the qualified institutional investors and high networth individual categories were yet to be subscribed.
Star is the largest retail health insurer with 31 per cent market share. During FY18-21, the company witnessed a 31.4 per cent growth in total premium. The company’s total gross written premium (GWP) in FY21 was Rs 9,348.95 crore. However, the company posted a loss of Rs 825.58 crore for the year ended March 31, 2021, compared to a profit of Rs 268 crore in FY20. The losses have been on account of Covid and extraordinary adjustments.
Fund managers said pricing of the IPO compared to its peers such as ICICI Lombard or New India Assurance was steep despite the losses in FY21. The listing debacle of Paytm this month has also made institutional investors wary, they said.