MUMBAI: Five companies including three general insurers, one financial services firm and a global private equity fund have been shortlisted to purchase Star Health and Allied Insurnce, two people with direct knowledge of the matter said. A deal could value India’s largest standalone health insurer atRs 6,500 crore, they added.
Bankers have shortlisted ICICI Lombard, HDFC Ergo, Bajaj Allianz, Hero Fincorp and PE firm Warburg Pincus, said one of them. “There is huge interest for Star Health Insurance’s business.”
The sellers have put a floor price of Rs 5,500 crore after it received bids from 12 companies last week, the second person said. “These shortlisted buyers will have to bid above the floor price.”
ICICI Lombard is a joint venture between ICICI Bank and American Insurer Lombard, while HDFC Ergo is a venture between HDFC Bank and Munich Re Group’s ERGO International unit and Bajaj Allianz is a business between the Bajaj Finserv and European insurer Allianz. Hero Fincorp is the financial business of two-wheeler maker HeroMotorCorp
Kotak Investment Bank, Mizuho Securities and Evercore Partners are advising the seller.
The shortlisted firms didn’t respond until press time Wednesday to emails seeking comment. Star Health also didn’t respond to an emailed questionnaire.
Star Health, founded in 1996, is owned by a clutch of global and local private equity funds, Omanbased insurer Oman Insurance Company and Dubai-based conglomerate ETA Trading. Star Health managing director V Jagannathan, too, has a minority stake. It writes policies in personal accident, medical claim and overseas travel insurance.
A deal will help private equity funds Sequoia Capital, ICICI Venture and Tata Capital as well as investors Apis and ETA Trading to exit from the company. Health insurance has the most headroom and enjoys a bigger retail play in India, “considering the rising medical spend and a large gap that needs to be bridged for better risk management,” said Joydeep Roy, partner & leader-insurance, PwC.
Star’s valuation has risen since the last deal when Apis Partners and ICICI Venture purchased a 15 per cent stake for Rs 320 crore at valuation of more than Rs 2,100 crore.
After the regulator allowed general insurers to apply for standalone health companies, it received several applications, including from Reliance Capital.
India has six standalone health insurance companies with a 4.55 per cent share in the overall insurance business. The latest to enter the sector was Aditya Birla Health.
The insurance regulator has allowed private equity funds to invest in insurance as promoters if they put the money through a special purpose vehicle with a fiveyear lock-in period.
Warburg Pincus has recently bought a 12.13per cent stake in ICICI Lombard from Canada’s Fairfax Holdings. The Prem Watsa fund has sold a majority stake in the country’s biggest general insurance company to start a new health insurance company.
The country’s largest mortgage lender, HDFC, raised Rs 13,000 crore to invest in existing subsidiaries and expand into new segments including health insurance. It is exploring opportunities in the health insurance sector
Source:- Economic Times