Star Health Shares Trade Near IPO Price in Tepid Mumbai Debut
Investors are turning increasingly skeptical about IPOs as a record year for Indian listings draws to a close.
(Bloomberg) -- Shares of Star Health and Allied Insurance Co. closed little changed on their trading debut in Mumbai, the first major listing since Paytm last month as investors gauge enthusiasm for richly valued stocks that offer poor prospects for near-term profitability.
The Indian insurer, backed by billionaire Rakesh Jhunjhunwala and his wife Rekha, closed 0.8% above its IPO price of 900 rupees ($12), after falling as much as 8.1% earlier. Some investors had questioned the issue price as Star Health swung to a loss in the year ended March 2021. The company raised $848 million rather than the $975 million it sought.
Relatively stable demand at the debut helped counter growing skepticism over IPOs as a record year for Indian listings draws to a close. One 97 Communications Ltd., operator of the digital payments service Paytm, is down about 25% since its Nov. 18 listing after completing India’s biggest-ever IPO.
“I don’t think demand is slowing for IPOs, there is enough money in the market,” said Sanjiv Bhasin, a director with IIFL Securities Ltd. “There are enough people who are opening new accounts to get a first hand experience and there will be enough demand to absorb new issues.”
Overall, Indian IPOs that have raised at least $500 million this year have risen an average 17% on their first day of trade, data compiled by Bloomberg show. Of the 10, half notched a first-day gain, including food delivery startup Zomato Ltd. and beauty retailer FSN E-Commerce Ventures Ltd.
Still, others remained skeptical about Star Health’s prospects. While premiums are rising given that health insurance is more of a protection product, claim ratios are also increasing, according to Deven Choksey, a strategist at KRChoksey Investment Managers.
“I am not too sure how much profit it can make as a pure health insurance company,” Choksey said.
Amarjeet Maurya, an analyst at Angel One Ltd., said omicron may extend the company’s losses into the year through March 2023.
On Tuesday, pharmacy chain Medplus Health Services Ltd. cut its IPO to $186 million from $219 million planned, before its subscription starts next week.
Kotak Mahindra Capital Co., Axis Capital Ltd., BofA Securities India Ltd., Citigroup Global Markets India Pvt. and ICICI Securities Ltd. are among managers of Star Health’s IPO.
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