Even Rakesh Jhunjhunwala investments go awry; here's one

While Rakesh Jhunjhunwala had a string of successful investments such as A2Z Infra Engineering, Barbeque Nation, and Nazara Technologies delivering stupendous returns, the ace investor also makes investments that end up in negative returns. Jhunjhunwala-backed newly listed company Star Health and Allied Insurance has failed to impress investors so far and delivered a negative return of 8% since its listing on December 10.

According to the Red Herring Prospectus (RHP) filed with SEBI, Rakesh Jhunjhunwala owns a 14.98% stake, or 8.28 crore equity shares, in the company.

Star Health and Allied Insurance, the country’s largest private health insurer, got listed at a discount of 6% to the issue price on the domestic bourses on December 6. The insurer made its market debut at ₹845 per share, down 6.11% on the NSE against the IPO issue price of ₹900. On BSE, the stock debuted at ₹848.8, 5.69% lower to the IPO price.

Since listing, the stock has retreated nearly 8%, down from the IPO price of ₹900 apiece. It has touched a high and low of ₹940 and ₹795, respectively, over the last six sessions.

On Friday, Star Health shares were trading 0.6% lower at 827 apiece on the BSE. The stock declined as much as 1.5% during the session, in an otherwise weak broader market. In contrast, the BSE Sensex was trading 560 points or 0.97% lower at 57,339 at the time of reporting.

Star Health raised ₹6,400 crore via IPO

Star Health and Allied Insurance, owned by a consortium of investors including Rakesh Jhunjhunwala and Westbridge Capital, raised ₹6,400 crore in its initial public offering (IPO) at a price range of ₹870-900 apiece.

Despite the backing of Jhunjhunwala, the offer received tepid response from investors, with issue subscribing by only 79% during the three-day book-building process. Given the muted response from investors, especially high net-worth investors (HNIs), the company was forced to cut down the IPO size to ₹6,400 crore, as compared to the initial target of ₹7,249.18 crore. The company raised ₹2,000 crore by issuing fresh equity shares and ₹4,400 crore via offer for sale (OFS) from existing promoters and shareholders.

The offer, which opened for subscription between November 30 and December 2, received bids for 3.6 crore shares against the issue size of 4.5 crore shares. The quota reserved for retail investors was subscribed 1.1 times, while the portion for qualified institutional buyers by one time. The non-institutional investors' category was merely subscribed 19%.

Insurer secures ‘buy’ rating

The company has recently secured its first ‘buy’ rating post its listing on the domestic exchanges. Brokerages at Emkay Global have assigned a buy rating for Star Health, citing the company’s early unassailable position in a high-growth industry.

Analysts see up to 25% potential upside in the stock by March 2023, with a target price of Rs 1,135.

Established in 2006, the private health insurer captures 15.8% of the market share, while it holds 31% in the retail health segment.