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Today, Religare Enterprises initiated the IPO process for its subsidiary, Care Health Insurance, following a ₹ 2,320 crore one-time settlement (OTS) with Religare Finvest. Over the next month, investment bankers are expected to present IPO mandate pitches as part of this process.
The bulk of the insurer’s Gross Direct Premium Income (GDPI) and Net Earned Premium (NEP) is derived from health insurance, contributing 91% to GDPI and 88% to NEP. Travel insurance adds a minor share of 2.4% to GDPI and 3.4% to NEP while personal accident insurance contributes 6.2% of GDPI and 8.5% of NEP.
Care Health Insurance is planning an IPO that could potentially raise ₹ 1,500-2,000 crore through an equity dilution of 15-20%. The funds raised from the primary sale are earmarked for enhancing solvency, which currently stands at 1.73 times the regulatory minimum, and providing growth capital.
Stakeholders like Religare Enterprises may offload their stakes in the IPO. With a Q2FY24 book value of ₹ 1,905 crore, Care Health Insurance holds a market share of 22% in Standalone Health Insurance and 2.2% in General Insurance. It competes with companies like Star Health Insurance. Despite being half its size, Care Health Insurance is growing faster and has better financial aspects.
The valuation of Care Health Insurance is projected between 4X to 8X Price/Book Value (P/BV), with Religare Enterprises’ stake valued between ₹ 7,620 Cr to ₹ 15,240 Cr.
InvestingPro Insights
Religare Enterprises (RELG) has been a prominent player in the Insurance industry, and with the initiation of the IPO process for its subsidiary, Care Health Insurance, it’s worth looking at some key InvestingPro data and tips.
Firstly, RELG has been profitable over the last twelve months, indicating a strong financial foundation. Additionally, the company has seen a large price uptick over the last six months, which may suggest investor confidence in its current strategies, including this new IPO initiative.
Secondly, RELG has demonstrated a strong return over the last five years, reinforcing the company’s consistent growth and stability. This is particularly relevant given the company’s plans to enhance solvency and provide growth capital with the funds raised from the IPO.
Finally, it’s worth noting that RELG is trading at a low earnings multiple. This could potentially indicate an undervalued stock, making it an attractive investment opportunity, especially considering the upcoming IPO of Care Health Insurance.
Remember, these are just a few insights. InvestingPro offers countless more tips and real-time data to help you make informed investment decisions.
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