Star Health Insurance Investors Head for Exit
Place their holdings on the block; four investment banks have made pitches
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.