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Star Health & Allied Insurance, the first stand-alone health insurance company in the country, has formally kicked off a sale process with an asking price tag of $900 million to $1 billion. Kotak Mahindra Bank and MAPE Advisory are working with the investors and the management of the Chennai-based insurer to find a suitor, people directly aware of the matter said.
The decade-old Star Health counts ICICI Venture, Sequoia Capital, Tata Capital Growth Fund, Alpha TC Holdings, Apis Partners, Oman Insurance Company and ETA Star of Dubai as its investors. The company is the largest independent health insurance company and is the brainchild of V Jagannathan, who formerly headed public sector insurer United India Insurance.
The management, led by Jagannathan, has a stake and will be a crucial voice in deciding on the sale of the company, which also deals in personal accident and travel insurance covers.
"The sale process has been rolled out very recently. We are approaching all potential strategic and buyout private equity funds," said one of the sources cited earlier in the report. The existing shareholders believe the timing was ripe to cash out as valuation benchmarks in the insurance sector were being established through a slew of IPOs and M&A activity. ICICI Lombard was the first non-life insurer to go public last month with a market valuation of Rs 31,000 crore. When contacted, Star Health refused comment on the matter.
The deal making activity in financial services, and insurance in particular, has revved up with the established players getting into the M&A mode. Smaller insurers have been struggling to meet solvency requirement in a high growth and hyper competitive industry poised for consolidation.
In fact, Star Health, with a capital base of Rs 1,050 crore, in the recent past has seen its solvency margin slip to 1.53 times the statutory requirement which is close to the minimum of 1.5 times prescribed by the regulator.
Star Health's promoter group holds close to around 44% of which 37.5% is with domestic and 6.16% is with foreign investors. Total foreign investment in the company stood at 36.5% as against the maximum permissible 49%. The company's paid-up capital stood at Rs 456 crore and an additional Rs 574 crore of reserves and surplus at the end of the first quarter. The company had reported a profit of Rs 118 crore for FY17, down 13.6% from Rs 136 crore in the previous fiscal.
