Star Health In­surance In­vestors Head for Exit

Place their hold­ings on the block; four in­vest­ment banks have made pitches

The Economic Times - - Companies: Pursuit Of Profit -

Shilpy Sinha & Baiju Kalesh

Mum­bai: In­vestors in Star Health In­surance Co, in­clud­ing ICICI Ven­tures, Se­quoia Cap­i­tal and Oman In­surance, have put their hold­ings on the block as they look to exit a ven­ture that is get­ting fiercely com­pet­i­tive.

At least two global and two lo­cal in­vest­ment banks have made pitches to PE in­vestors for a man­date to sell the com­pany, two peo­ple with di­rect knowl­edge of the de­vel­op­ment said. Of the two surces, one is an in­vestor and an­other, an in­vest­ment banker. Bank of Amer­ica Mer­ill Lynch, Credit Suisse and lo­cal play­ers Ko­tak Mahin­dra Cap­i­tal Com­pany and ICICI Se­cu­ri­ties have par­tic­i­pated in the beauty pa­rade in the past fort­night. But get­ting a sin­gle buyer for many hold­ers’ stake is be­com­ing tough as it had to sell ei­ther to a strate­gic in­vestor or other PE funds in a sec­ondary sale, said in­vest­ment bankers. “As a com­pany pol­icy, we do not com­ment on mar­ket spec­ula- Star Health is a JV be­tween ICICI Ven­tures, Se­quoia Cap­i­tal, Tata Cap­i­tal Growth Fund, Al­pha TC Hold­ings and Oman In­surance Com­pany Sol­vency mar­gin slipped be­low norm of 1.5 times, and co raised in last 2 years to meet it

tions,” said Star Health in an email re­sponse. Bank of Amer­ica Mer­rill Lynch, Credit Suisse, ICICI Se­cu­ri­ties and Ko­tak de­clined com­ment.

Star Health is a joint ven­ture be­tween ICICI Ven­tures, Se­quoia Cap­i­tal, Tata Cap­i­tal Growth Fund, Al­pha TC Hold­ings and Oman In­surance Com­pany.

“In­vestors of Star Health have called bankers to give a pre­sen­ta­tion to man­date them to sell the busi­ness,” said one of the two quoted above. “There are some mi­nor glitches and a fi­nal man­date will be awarded soon.’’ In­dian share­hold­ers own 63.76% while the rest is owned by for­eign in­vestors, ac­cord­ing to the data avail­able un­til Septem­ber 2016. The com­pany has been strug­gling to meet cap­i­tal re­quire­ment, as it is grow­ing at over 30%. Its gross writ­ten pre­mium in­come ex­panded 39.32% be­tween April and De­cem­ber 2016.

The com­pany, with a cap­i­tal base of ₹ 1,050 crore, is the first stand­alone health in­surance com­pany which deals in per­sonal ac­ci­dent, medi­claim and over­seas travel in­surance.

Star has been at­tract­ing in­vestors as In­di­ans are rush­ing to buy in­surance poli­cies with health ex­pen­di­ture go­ing through the roof. Last year, Apis Part­ners and ICICI Ven­tures ac­quired 15% stake in Star Health and Al­lied In­surance for ₹ 320 crore, valu­ing the com­pany at ₹ 2,100 crore.

In 2013-14, the com­pany had done a rights is­sue and also sold a mi­nor­ity stake in 2016 to meet its sol­vency needs. As per Irda reg­u­la­tions, life and gen­eral in­surance com­pa­nies need to main­tain sol­vency mar­gins, which act as buf­fer against risks.

Star Health, founded in 2006, had seen its sol­vency mar­gin slip be­low the reg­u­la­tory re­quire­ment of 1.5 times.

It had raised about ₹ 600 crore in the past two years to meet sol­vency norms.

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