Religare Enterprises is planning a Rs 2,000-crore initial public offer (IPO) for its subsidiary, Care Health Insurance, its health insurance concern. The IPO is expected to be launched towards the end of the current fiscal, according to news reports. Religare Enterprise is in talks with investment banks for the listing of shares.
Tapping into the IPO frenzy
With the stock market hitting fresh highs, there has been a flurry of IPO announcements this year. Data from news reports shows that 21 companies have filed or refiled their offer documents with the capital markets regulator SEBI for either initial public offers or follow-on public offers in the between April and mid-June 2021. In the week beginning June 14 alone, four companies saw their initial share sale launches in a bid to raise combined funds of over Rs 9,120 crore. As many as 17 companies have come out with IPOs thus far in 2021 and have raised a collective amount of over Rs 17,500 crore. Good valuations, liquidity and companies funding needs have all led to companies planning IPOs. Financial services companies, including insurance companies and fintechs are expected to gain Rs 55,000 crore in the current fiscal from the markets.
Third health insurer to eye an IPO?
The health insurance subsidiary of Religare Enterprises, Care Health, is likely to be the third health insurance company to launch an IPO this year, following Star Health Insurance and Medi Assist India. Media Assist, the biggest third party administrator in India, filed its draft red herring prospectus (DRHP) in May to raise nearly Rs 850 crore while Start Health plans to raise Rs 2,000 crore from its public issue.
Religare Enterprises comprises four key businesses including Religare Finvest, Care Health insurance, Religare Broking and Religare Housing Development Finance Corporation, to cater to SME finance, health insurance, retail broking and affordable housing, respectively. Religare recently announced the proposal to raise Rs 570 crore through preferential share issuance to existing shareholders and other investors. The Burman Family Holdings is one of the key investors of Religare, and has a stake of more than 14 per cent in the company. The Burman family is the controlling shareholder of the Dabur Group. The company said it would issue over 5.4 crore shares to its existing shareholders, and that the funds raised would be used as capital for investment in its subsidiary holdings.
REL owns nearly 70 per cent stake in Care Health, while Kedara Capital has nearly 18 per cent stake in the insurance firm. Public sector banks like Corporation Bank and Union Bank also own a 6 per cent stake in Care Health.
Care Health offers a range of products in the health insurance space, including critical illness, maternity, personal accidents, top-up coverage and insurance for international travel, apart from group health insurance. The insurance firm posted gross premium of Rs 2,560 crore for the fiscal year 2021, while its business grew by more than 30 per cent in the fiscal year 2020. Care Health reported profits of Rs 65.65 crore that year, post tax. The standalone health insurance sector registered a growth rate of 21 per cent that year.
Rise in health insurance product demand; more space to grow
According to IBEF, in March 2021, health insurance companies in the non-life insurance sector grew by 41 per cent, on the back of a rise in health insurance products because of the Covid-19 pandemic. The General Industry Council, according to a news report, noted that health insurance contributed to 29.7 per cent of premiums collected by non-life insurance companies in the April – September period of 2020. Also, the individual policy premiums rose by 34 per cent in this period when compared to the same period a year ago.
Health insurance coverage in India continues to be low, with a massive 85.9 per cent of individuals in rural India and 80.9 per cent of Indians in urban India having zero coverage, according to data from news reports. This means there is still plenty of space for growth for health insurers.
Care Health Insurance, the health insurance subsidiary of Religare Enterprises, a financial services firm is exploring the possibility of launching a Rs 2,000-crore initial public offer towards the end of the current fiscal year. When it materialises, Care Health could become the third company from the health insurance sector to launch an IPO, following Medi Assist India and Star Health Insurance.