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Star Health and Allied Insurance Company is the second largest stock in Rakesh Jhunjhunwala's portfolio in value terms after the gems and jewellery giant Titan Company. Since its market debut, the general health insurer has witnessed a sharp downturn in its stock performance. However, this month has turned out to be fruitful for Star Health as the stock has picked its moment and by Friday even inched closer to ₹640 mark. In seven trading sessions, Star Health shares have skyrocketed by more than 30%. Riding on the strong performance, Jhunjhunwala's wealth in the stock jumps around ₹1,452 crore in seven sessions. The stock still has the potential to rise further.
On Friday, Star Health shares closed at ₹620.05 apiece up by ₹23.35 or 3.91% on BSE. The shares touched an intraday high of ₹639 during the day. Its market cap currently is around ₹35,721.09 crore.
The shares were below ₹500 level till mid of last week. On July 6, the shares stood at ₹475.95 apiece on BSE, but since then the shares ranged above ₹500 to over ₹600 level.
Since July 6, to date, the shares have jumped by ₹144.1 or 30.28% on Dalal Street.
Rakesh and his wife Rekha are promoters of Star Health under the individuals/Hindu undivided family category. As of June 2022, Rakesh Jhunjhunwala holds 8,28,82,958 equity shares or 14.39% in Star Health and he holds another 1,78,70,977 equity shares or 3.10% in the name of Jhunjhunwala Rekha Rakesh. Both the portfolio is managed by Rakesh.
As of now, the couple's shareholding is around 10,07,53,935 equity shares, or 17.49% in Star Health.
With the strong performance of Star Health, Rakesh's wealth increased by ₹1,451.86 crore in the company in just seven trading sessions.
As per Trendlyne data, to date, Jhunjhunwala's shareholding is valued at ₹6,243.2 crore in Star Health and is the second largest stock after Titan under which the holding is aggregated to ₹9,821 crore.
It needs to be noted that Jhunjhunwala's portfolio wealth moves according to the price movement. Hence, they are bound to change ahead.
Star Health shares have plunged by nearly 32% since its market debut on December 10 last year on stock exchanges. The shares had also touched a 52-week high of ₹940 apiece during these days before correcting.
The company launched its IPO from November 30 to December 3 last year at a price band of ₹870 to ₹900 apiece. The IPO witnessed sluggish demand as it did not fully subscribe. Star Health IPO subscribed by just 79% against the offered size with qualified institutional investors and retail investors portion receiving the full subscription. It was the non-institutional investors' category that showed a weak response.
Star Health shares are currently in recovery mode and steadily picking up pace.
Earlier this month, ICICI Securities research analysts Ansuman Deb and Ravin Kurwa in their report dated July 3 said STAR retail health GDPI has grown at 29% CAGR between FY18-22 vs industry retail health GDPI growth of 18%. FY23-TD growth
has moderated to 13% on the high base of Apr/May’21. Market share as on FY23-TD stood at 30.6%, higher than 29% in FY22-TD (Apr and May 21).
They added that "no company has been able to garner a significant amount of market share in the retail health segment except Star Health and Care Insurance (and also HDFC Ergo due to acquisition of Apollo Munich which was SAHI). Star/Care retail health market share has improved from 23%/4% in FY18 to 33%/7% in FY22, respectively."
Further, the analysts stated that PSU market share erosion in the retail health segment along with low solvency ratios will provide enough headroom for the growth of strong private players like STAR. PSUs’ retail health market share declined from 38.3% in FY18 to 25.9% in FY23-TD.
"Life insurance companies offered indemnity-based health products till 2016. They had an indemnity product (which was long term) till 2013. Approximately 21,000 policies were sold per annum till 2013 compared to ~8.8mn retail health policies sold by nonlife insurers in FY13. Even now, life insurance companies offer critical illness products. As such, with strong agency (550k agents) and hospital network (12,820 network hospitals) along with product innovations, STAR should be able to sustain any increase in competitive pressure," the duo added.
While giving a 'Buy' recommendation on Star Health, the analysts concluded that "We value the stock with a revised target price of Rs700 based on 40x (earlier 50x) FY24E EPS of Rs17.5 (earlier 16.7). We factor GDPI CAGR of 16.5% between FY22- 24E, investment leverage of 2.3x in FY24E, combined ratio of 95%, and investment yield of 7% for FY24. Our change in multiple reflects the possibility of heightened competition, subsequent covid waves, and overall increase in the cost of capital."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.