This Rakesh Jhunjhunwala-owned stock hits new low; tanks 34% from IPO price

Star Health hit a record low of Rs 595, slipping 2.5 per cent on the BSE, its lowest level since its stock market debut.

Shares of Star Health and Allied Insurance Company (Star Health) hit a record low of Rs 595, slipping 2.5 per cent on the BSE in Wednesday’s trade. The stock has fallen below its previous low of Rs 603 touched on March 16, 2022. Star Health had made its stock market debut on December 10, 2021.

In the past one week, the share has underperformed the market by falling 14 per cent, as compared to a 1 per cent decline in the S&P BSE Sensex. With the recent fall, it has corrected 34 per cent from its issue price of Rs 900 per share and 37 per cent from its record high level of Rs 940 touched on the day of listing.

Ace investor Rakesh Jhunjhunwala is a promoter of Star Health. He (14.40 per cent) and his wife Rekha Jhunjhunwala (3.11 per cent) collectively held 17.51 per cent stake in the insurer as of the March 2022 quarter, shareholding pattern data shows.

Star Health, the largest private-sector health insurance company, had received a poor response for its Rs 7,250-crore initial public offering (IPO), due to expensive valuations, dent in profitability on account of Covid-19. The IPO had just managed to sail through despite a poor response from investors, garnering just 79 per cent subscription.

Meanwhile, for financial year 2021-22 (FY22), Star Health reported a net loss of Rs 1,041 crore, as against a net loss of Rs 1,086 crore in FY21. Total income zoomed 111 per cent to Rs 10,289 crore from Rs 4,877 crore.

The management believes that in the absence of any further Covid-19 wave, Star Health’s performance in FY23 will reflect normalcy in business, with the loss ratio at around 65 per cent and CoR at 94-95 per cent.

Benign hospitalization needs during the Omicron wave led to an improvement in claim frequency, while the gradual withdrawal of Covid-19 compliance-led overheads on non-Covid procedures eased claims severity.

Easing claims frequency and severity should drive a quicker improvement in the claims ratio, said analysts at Emkay Global Financial Services in a report dated March 24, 2022.

The company is well on track to return to profitable growth; its capital position is comfortable to support growth in coming years, as per the management. “Overall, Star Health remains an attractive story in a sunrise sector. 1-2 quarters of profitable growth delivery will likely lead to a material outperformance of Star Health’s shares, in our view,” the brokerage added.