Star Health’s Volatile Debut Adds To Caution Over Indian IPOs

Investors are turning skeptical about IPOs as a record year for Indian listings draws to a close.

Shares of Star Health and Allied Insurance Co. were volatile in Mumbai in the first major listing since Paytm’s debut last month as investors gauge enthusiasm for richly valued stocks that offer poor prospects for near-term profitability.

The stock fell as much as 8 per cent below its IPO price of Rs 900 but soon recovered losses to trade at Rs 905 as of 10:10 a.m. in Mumbai. Some investors had questioned the issue price as Star Health swung to a loss in the year ended March 2021.

“I am not too sure how much profit it can make as a pure health insurance company,” said Deven Choksey, a strategist at KRChoksey Investment Managers. Premiums are rising given that health insurance is more of a protection product, but at the same time, their claim ratios are also increasing, he said.

Investors are turning increasingly skeptical about IPOs as a record year for Indian listings draws to a close. Backed by billionaire Rakesh Jhunjhunwala and his wife Rekha, Star Health raised $848 million rather than the $975 million it sought, inviting scrutiny to its trading debut. Investors are also wary as shares of One 97 Communications Ltd., operator of the digital payments service Paytm, are down about 25 per cent since its Nov. 18 debut versus a 2.1 per cent drop for the benchmark index.

On Tuesday, pharmacy chain Medplus Health Services Ltd. slashed its IPO size to $186 million from $219 million planned, ahead of the start of its subscription next week.

Overall, Indian IPOs that have raised at least $500 million this year have risen an average 17 per cent on their first day of trade, data compiled by Bloomberg show. Of the 10, half notched a first-day gain, including food delivery startup Zomato Ltd. and beauty retailer FSN E-Commerce Ventures Ltd.

Kotak Mahindra Capital Co., Axis Capital Ltd., BofA Securities India Ltd., Citigroup Global Markets India Pvt. and ICICI Securities Ltd. are among managers to Star Health’s IPO.

The pandemic has boosted insurance claims and Amarjeet Maurya, an analyst at Angel One Ltd., said omicron may extend the company’s losses into the year through March 2023.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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