Niva Bupa Health IPO review (May apply)

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Review By Dilip Davda on November 4, 2024

•    The company is one of the leading health insurance company in India, that has posted fast growth in its business.
•    It has introduced policy holder friendly products with world standard services.
•    The company placed internally some shares between the price range of Rs. 67.15 - Rs. 85 ahead of IPO, that augurs well. 
•    Though prima-facie the issue appears aggressively priced, well-informed investors may park funds for medium to long term. 

ABOUT COMPANY:
Niva Bupa Health Insurance Co. Ltd.  (NBHICL) is one of the leading health insurance company in India. Its purpose is to "give every Indian the confidence to access the best healthcare". It aims to achieve this purpose through health insurance products and services that enable customers to navigate their healthcare journey, by providing them access to a holistic health ecosystem. 

According to the RedSeer Report, NBHICL is one of India's largest and fastest growing SAHI based on overall health GDPI of Rs. 5494.43 cr. in Fiscal 2024. From Fiscal 2022 to Fiscal 2024, our overall GWP grew at a CAGR of 41.27% and our GWP from retail health grew at a CAGR of 33.41%. From the three months ended June 30, 2023 to the three months ended June 30, 2024, our overall GWP also grew by 30.84% and our GWP from retail health grew by 31.99%. Our growth in overall health GDPI from Fiscal 2022 to Fiscal 2024 of 41.37% is one of the highest growths among SAHIs, and is almost double of the industry's average, which according to the RedSeer Report, increased by 21.42% from Fiscal 2022 to Fiscal 2024. As per the RedSeer Report, it had a market share in the Indian SAHI market of 17.29%, 16.24%, 15.58% and 13.87% for year-to-date August 2024 (Fiscal 2025), Fiscals 2024, 2023, and 2022 respectively based on retail health GDPI. 

Responding to the evolving needs of customers over 16 years of operations, it has built a track record of product innovation catering to a range of customer groups. The company aims to create a health insurance platform of choice for customers in India. It offers customers the ability to access a comprehensive health ecosystem and service capabilities via its 'Niva Bupa Health' mobile application and website, thereby offering them a holistic proposition. This application provides customers access to a range of healthcare solutions including diagnostics, digital consultation, annual health check-ups and health education content. Customers can also undertake claims submission, policy servicing and track health parameters through this application. Through its diverse and evolving product suite and 'Niva Bupa Health' mobile application and website, the company aims to provide customers access to a range of healthcare and disease management solutions.

Our Promoters - Bupa Singapore Holdings Pte. Ltd. and Bupa Investments Overseas Limited, are members of the Bupa Group. Through its association with the Bupa Group, the company has access to its international healthcare insurance experience. Established in 1947, the Bupa Group is an international healthcare organization serving over 50 million customers worldwide, as at December 31, 2023, as per the RedSeer Report. According to the RedSeer Report, with no shareholders, it reinvests profits into providing more and better healthcare for the benefit of current and future customers. 

According to the RedSeer Report, Bupa offers health insurance, healthcare provision and aged services, and it has businesses around the world but, principally, in the UK, Australia, Spain, Chile, Poland, New Zealand, Hong Kong SAR, Turkey, Brazil, Mexico, India, the US, Middle East and Ireland. According to the RedSeer Report, Bupa also has an associate business in Saudi Arabia. As per the RedSeer Report, with Bupa Singapore Holdings Pte. Ltd. and Bupa Investments Overseas Limited as its Promoters, the company is the only health insurance company in India majority controlled by a foreign global healthcare group. 

It had 14.99 million active lives insured as of June 30, 2024. It is strategically focused on the retail health market and GWP from retail health products was 67.65% and 68.47% of overall GWP for the three months ended June 30, 2024 and Fiscal 2024, respectively. According to the RedSeer Report, in India, health insurance providers can be broadly categorized into three main types and as of August 31, 2024 there are four IRDAI-recognized public insurers excluding specialized insurers, 21 private insurers, and 7 IRDAI-recognized SAHIs. The retail health insurance segment is the most promising segment in the health insurance industry in India as of March 31, 2024, due to higher average premium per life, higher renewal rates and lower Combined Ratios as compared to group health insurance, according to the RedSeer Report.

Its customer centric approach is driven by product innovation. It has demonstrated a track record of product innovation, launching products with "industry-first" features. As per the RedSeer Report, "Reassure" and "Reassure 2.0" products are one of the leading health insurance products on the market with unique "industry-first" features such as (a) "2 Hours Hospitalization", where all hospitalizations for 2 or more hours are covered, (b) "Lock the Clock", where the age of a person for premium calculation purposes is locked/fixed at the entry age until the time a claim is paid, (c) "ReAssure Forever", where the base sum insured can be carried forward after renewal and customers are entitled to two times sum insured post claim payment without any additional costs, and (d) "Extended Family First", which provides the ability to add up to 19 extended family relations to the coverage plan. According to the RedSeer Report, the "ReAssure Benefit" feature is the first of its kind in India in terms of offering unlimited reinstatement/refill of sum insured in a policy year. In addition, according to the RedSeer Report, its "Aspire" product contains several "industry-first" features such as "M-iracle", "Cash-bag" and "Future Ready", and "Senior First" product offers "industry-first" features such as "2 Hours Hospitalization". 

It is focused on enhancing customer experience and promoting customer well-being through creating a "360-degree" health and wellness ecosystem platform through 'Niva Bupa Health' mobile application and website. Its health and wellness ecosystem platform provides customers with a range of features to cater to their needs. This includes claims submission functions to submit reimbursement claims and track claims status and Network Hospitals locators, as well as a self-service section where customers can view and update their policy details and access their policy documents. The company also provides access to holistic health management capabilities through its health and wellness ecosystem. 

As of June 30, 2024, the company had 152436 individual agents, 77 corporate agents, 486 brokers, 196 Insurance Marketing Firms, 5500 point of sales persons, 14 Web aggregators, and 210 physical branches. It had an employee strength of 8555 as of the said date. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden combo book building route IPO of 297297297 equity shares of Rs. 10 each worth Rs. 2200.00 cr. (at the upper cap). The company has announced a price band of Rs. 70 - Rs. 74 per share. The issue constitutes fresh equity shares worth Rs. 800.00 cr. (approx. 108108108 shares at the upper cap), and an offer for sale (OFS) worth Rs. 1400.00 cr., (approx. 189189189 shares at the upper cap).  The issue opens for subscription on November 07, 2024, and will close on November 11, 2024. The minimum application to be made is for 200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The IPO constitutes 16.27% of the post-IPO paid-up equity capital of the company. From the net proceeds of the fresh equity issue, the company will utilize the available funds for augmenting its capital base.

The company has allocated not less than 75% for QIBs, not more than 15% for HNIs and not more than 10% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., Morgan Stanley India Co. Pvt. Ltd., Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd., HDFC Bank Ltd., Motilal Oswal Investment Advisors Ltd., while KFin Technologies Ltd. is the registrar to the issue. Syndicate members for this issue are Kotak Securities Ltd., HDFC Securities Ltd., and Motilal Oswal Financial Services Ltd.

The company has issued initial equity capital at par value, and has issued/converted further equity shares in the price range of Rs. 11.71 - Rs. 67.15 between September 2020, and October 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NA, Rs. 15.57, and Rs. 34.88 per share. 

Post IPO, company's current paid-up equity capital of Rs. 1718.92 cr. will stand enhanced to Rs. 1827.03 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 13520.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a GWP/net profit/ - (loss) of Rs. 2809.97 cr. / Rs. - (196.53) cr. (FY22), Rs. 4073.03 cr. / Rs. 12.54 cr. (FY23), and Rs. 5607.57 cr. / Rs. 81.85 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it marked a loss of Rs. - (18.82) cr. on a GWP of Rs. 1464.18 cr. As per historic data, all insurance companies have sluggish first half and major activities happens in the second half as usual. 

For the last three fiscals, the company has reported an average EPS of Rs. 0.05 (basic), and an average RoNW of - (2.58) %. The issue is priced at a P/BV of 6.19 based on its NAV of Rs. 11.95 as of June 30, 2024, and is at a P/BV of 4.73 based on its post-IPO NAV of Rs. 15.66 per share (At upper cap). 

If we attribute annualized FY25 earnings to post-IPO fully diluted equity base, then the asking price is at a negative P/E, and based on FY24 earnings, the P/E stands at 642.22. Thus the issue appears aggressively priced. 

IMPORTANT POINTS:
While health insurance segment has become the most sought after investment proposal post the Pandemic, Health insurance sector is poised for bright prospects, and this company in particular has emerged as the fastest growing health insurance company with world standard services and following IFRS accounting standards. What is worth more emphasising is, the long term fund parking done by some of the marquee investors like Paragon Partners Growth Fund II, SBI Life Insurance, India Business Excellence Fund IV (associate of Motilal Oswal Investment, at Rs. 67.15, and the pre-IPO internal placement by Fettle Tone LLP at Rs. 85 per share in October 2024 to A91 Emerging Fund II LLP. The promoter company Bupa Investment Overseas buying stake (366381439 shares) at Rs. 74 per share internally in January 2024 from Fettle Tone LLP indicates the confidence and likely future prospects of NBHICL. These recent transactions augur well to justify the IPO pricing. The company has already turned the corner in FY23 and hopes to maintain the track record of growth in coming years. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It adopted a dividend policy in May 2024, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Star Health and Allied, ICICI Lombard, and The New India Assurance, as their listed peers, they are trading at a P/E of 33.3, 41.6, and 23.0 (as of November 04, 2024). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The six BRLMs associated with the offer have handled 93 public issues in the past three fiscals, out of which 23 issues have closed below the offer price on listing date.

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