The market has started fluctuating again. And this time, the amount of volatility is massive, which is only partly due to the U.S. elections scheduled soon. This is visibly affecting the Indian market also. Amidst all this, we now have four IPOs, which are launching within a similar bracket, giving tremendous confusion among investors. Some are associated with food delivery, some with insurance, while others are even related to solar energy. Which one is it that I should actually apply for? Should I apply for this, or that instead? Huge dilemma.
Another one from the insurance sector has just entered from such IPOs-Niva Bupa Health Insurance. Let’s get into this and see if it’s worth applying for or not.
What’s going on in the insurance sector?
The insurance sector is growing post-COVID. All companies have hiked their premiums, and slowly people are buying more insurance in view of uncertainty. It looks very attractive to the investors, but for the retail buyers, this rising premium might give them reason to worry. Do we see results coming from Niva Bupa or are they going to avoid it? Let’s break it down in this article.
Important Highlights of Niva Bupa Health Insurance:
Niva Bupa is a joint venture between the Bupa Group and Fitlton LLP, incorporated in 2008. The company primarily operates in health insurance, offering retail products for individuals and their families and group products for employers and employees. They provide a holistic approach to health insurance, and over the last two quarters, they have seen impressive growth in premiums.
Active lives insured: 14.7 million-or about 1.5 crore
Availability: Available in almost all of India (14 states and 4 Union Territories)
Growth: Gross premiums have grown at a CAGR of 41% over the last few years. Retail premiums have grown by 33%.
The company has been gaining from the increased awareness and demand for health insurance post-COVID.
Important Dates:
IPO Opens: November 7
IPO Closes: November 11
Allotment: November 12
Refund and shares credited: November 13
Listing Date: November 14
Price Band: The IPO’s price band will be between ₹73-74 while the face value is ₹10.
IPO Structure:
Niva Bupa is looking to raise a total of ₹ 2200 crores, out of which ₹ 800 crores would be a fresh issue and the balance an Offer for Sale (OFS). In other words, almost about 35-36 percent of the money going into the company would be the fresh issue, the remaining one through selling existing equity. Such an arrangement seems little lop sided as it doesn’t open much scope for infusing capital to the company account.
Retail Distribution: The individual investor will get 10% and QIBs will get 75%, and the rest is 15% HNIs.
Lot Size: The minimum lot size would be ₹14,800, which is for one lot, and the application of above ₹2 lakh amount will fall under the HNI category
Conclusion:
The growth trends on premiums and market shares look good, but the ominous sign that only 35% of the IPO proceeds is going to fresh capital infusion raises some apprehensions. Investors need to look at the extent of promoters’ equity dilution, which stands at 62% at present and can come down to 53-55%, besides the medium-term perspective of the company. Retail shareholding too is quite low; thus one needs to decide if returns are justified against various risk factors associated with such an investment. Now, if one is comfortable with risk and has a long-term approach, this IPO surely deserves an investment; but it is not quite a rip-off either to warrant its critical analysis against other options available in the market.
