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New Delhi: Niva Bupa Health Insurance, a standalone health insurance company, plans to raise Rs 800 crore through fresh equity to augment the capital base and Rs 1,400 crore through an offer for sale by the promoter group. The stake of Bupa Singapore Holdings will fall to 56% from 62.2% after the IPO while private equity firm True North will reduce its stake to 17.5% from 26.8%.
According to IRDAI data, the share of health insurance in the gross direct premium income (GDPI) of general insurers has expanded gradually to 37.1% in FY24 from 24.6% in FY18. The health insurance GDPI grew by 19.5% annually during the period to ₹1.1 lakh crore from ₹37,000 crore. It is likely to double by FY29 according to industry estimates. This underscores the rising importance of and future scope for the health insurance segment.
Given its pan-India presence, Niva Bupa is well-placed to take advantage of the opportunity. On the other hand, investors may recall the lacklustre performance of the country’s largest standalone health insurer Star Health and Allied Insurance Company since its public listing in December 2021. At Wednesday’s closing price of ₹481.7, it was traded way below the IPO price of ₹900 per share. Given these factors, long-term investors with a high risk appetite may consider the IPO of Niva Bupa.
Business: Niva Bupa focuses on the retail health market, which forms over two-thirds of the gross written premium (GWP). The direct sales channel consisting of in-house sales teams, and online and mobile app-based sales, accounted for 13.1% of FY24 GWP, the highest among standalone health insurers. Banks and other corporates accounted for 27% of the premium income while individual agents formed 32% and brokers 27%.
Financials: GWP doubled to ₹5,607.6 crore between FY22 and FY24. The combined ratio, which captures the profitability of insurance activity, improved to 98.8% from 107.5% during the period – a lower ratio is desirable. The solvency ratio improved to 2.6% from 1.7% between FY22 and FY24. The return on net worth was 5.7% in FY24.
Valuation: In December 2023, Motilal Oswal Investment Advisors through its India Business Excellence Fund IV acquired a 2.8% stake and SBI Life Insurance Company purchased a 1.3% stake at ₹67.2 per share. The weighted average acquisition cost in the past 12 months was ₹70.5. Niva demands a price-book multiple of up to 4.7 compared with 4.2 for Star Health.
Raises Rs 990 cr from Anchors
Niva Bupa Health Insurance on Wednesday raised Rs 990 crore from 32 anchor investors ahead of its IPO by allotting 133.7 million shares at the upper price band of Rs 74 apiece. Zulia Investments, Amansa Holdings, A91 Emerging Fund, Morgan Stanley Investment Funds Asia Opportunity Fund, Nippon Life India AMC, Axis Mutual Fund and Tata Balanced Advantage Fund were among the investors who participated in the round.
- Published On Nov 7, 2024 at 05:17 PM IST
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