Ace investor Rakesh Jhunjhunwala, in an interview with business news website Moneycontrol, stated that the recently-IPOed Star Health Insurance has a 31 per cent market share in the retail space in India, which is a rarity in the space. He added that he was both optimistic and hopeful about the same and therefore, decided not to sell any shares in the issue.
The Jhunjhunwala-backed Star Health and Allied Insurance company debuted on December 10 at a 6.1 per cent discount at Rs 848.8 on the BSE. On the NSE, it opened at Rs 845. The issue price was Rs 900.
Star Health is the largest standalone health insurance company in India with a market share of 15.8 per cent. The company commands a retail share of 31.3 per cent, it said in its IPO note. It primarily focuses on the retail health insurance segment with an 89 per cent mix with its network distribution of 779 health insurance branches across 25 states and five Union Territories in India.
On being asked about potential competition, the investor stated the company has the largest network and lowest cost-to-income ratio. Its size, therefore, props up an advantage.
The ace investor told the business publication that he was confident of the company's potential for growth and profitability. Jhunjhunwala mentioned that 15 per cent of the amount people spend on healthcare in India by means of health insurance. According to him, in advanced countries, the number goes up to 80 per cent. The investor mentioned that the industry is, therefore, still in its nascent stages, adding that it could grow 15-20 per cent over the next 15 years.
On the potential threat posed by the Omicron variant of the coronavirus, the ace investor stated that near-term factors might bother the perception of valuation. However, he sees the price scaling past Rs 900.
Answering a separate question, Jhunjhunwala stated that the whole purpose for growth is profitability and the ultimate aim was profitable growth. He told the publication that as a promoter of an insurance company, he is bound to provide capital adequacy to it. He added that the responsibility of being a promoter of an insurance company goes far beyond being a promoter of any other company.
Rakesh Jhunjhunwala said that as a promoter, he had complete faith in the management. He added that the company has excellent management in place alongside a quality succession plan. The ace investor expressed his apprehension about interfering with the company's functioning when things are being managed well enough.
On Friday, the stock closed at 6.48 per cent higher at Rs 906.85 on the BSE in comparison to the price at which it opened. On the NSE, the stock closed 0.11 per cent higher at Rs 901 apiece.