IPO Note : Niva Bupa Health Insurance Company Ltd by Geojit Financial Services Ltd
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Emerging health insurance player with strong parentage
Niva Bupa Health Insurance Company (NBHICL) is a Standalone health insurer (SAHI) operates in India's health insurance sector, with a primary focus on the retail health market and group insurance. Established in 2008, it is a joint venture between Bupa Group and Fettle Tone LLP. The company serves 14.99 million active insured lives, utilizing a diversified distribution strategy through both direct and intermediated channels. In FY24, the retail segment accounted for ~ 70% of the overall Gross Written Premium (GWP). By August 2024, the company has a 17.3% market share in the Indian SAHI market, increasing from 13.9% in FY22 based on retail health gross direct premium income (GDPI).
* India’s insurance gross direct premium income has surged from Rs.6.1 trillion in FY18 to Rs.10.4 trillion in FY23. It is projected to reach Rs.18-19 trillion by FY28, driven by rising incomes and greater insurance accessibility.
* Currently, Bupa Singapore Holdings Pte holds a 62.2% stake in the insurance company, while Fettle Tone LLP owns 26.8%. Niva Bupa leverages Bupa’s extensive global healthcare expertise, which serves 50 million customers worldwide.
* NBHICL has demonstrated robust growth, achieving a 44% YoY in revenue for FY24. The Gross Written Premium (GWP) increased by 37.7% to Rs.5,607cr in FY24 from Rs.4,073cr in FY23.
* In Q1FY25, It posted a loss of Rs.18.8cr narrowing from a loss of Rs.72.2cr in the year-ago period. The insurance industry has high gestation period.
* By Q1FY25, the company's retail health market share had increased to 9.9%, up from 7% in FY22, outperforming industry peers. Total market share is 5.1%.
* Robust increase in commission cost in recent years pose a risk for the continuity of improvement in future market share.
* At the upper price band of Rs.74, NBHICL will be trading at a post-issue adj. P/B ratio of 4.8x for Q1FY25, which seems reasonable compared to its listed peers. Considering its strong parentage, improving market share, and profitability, we assign a “Subscribe” rating for long-term investment.
Purpose of IPO
The offering comprises a fresh issue of Rs.800cr and an Offer-for-Sale (OFS) of Rs.1,400cr. The primary goal is to boost its capital base to strengthen solvency levels and a portion will be used for general corporate purposes.
Key Risks
* Depending solely on health insurance products makes it vulnerable to market fluctuations and changes in demand.
* New entrants or aggressive strategies by existing competitors can erode market share and profitability.
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