MUMBAI: Buyout firm West-Bridge Capital, which has teamed up with billionaire investor Rakesh Jhunjhunwala, is in talks to match the Rs 6,500-crore offer of ICICI Lombard for Star Health Insurance Company, said two people aware of the development.
“WestBridge Capital has sounded off shareholders of Star Health Insurance Company that it would like to match the offer of the highest bidder, that is ICICI Lombard,” said a source in the know of the development. Three bidders — ICICI Lombard, WestBridge Capital, and Premji Invest-Prudential — were shortlisted earlier.
Star Health Insurance had got a bid of Rs 6,500 crore from ICICI Lombard, which has made the listed non-life insurer a front-runner for the business. The deal is likely to close in a couple of weeks. The companys board is meeting on May 9 to discuss the matter.
ICICI Lombard had put in a bid of Rs 6,500 crore, WestBridge Capital Rs 6,100 crore, while Premji Invest partnered Prudential offered Rs 5,900 crore.
Both WestBridge Capital and Star Health did not comment.
The sale process, which started almost six months ago, has seen 12 bidders, including private-equity giants Bain Capital and Warburg Pincus and private-sector insurer HDFC Ergo. Star Health is the largest standalone health-insurance company in the country.
Investors in the company, which include funds like Sequoia Capital, ICICI Venture, and Tata Capital, and global private equity investor Apis, will get an exit option through the sale process. These four funds, along with Oman Insurance Company, own 70 per cent of Star Health, while the rest of the equity is held by Dubai-based investor ETA Trading.
Star Health Chairman and Managing Director V Jagannathan, who built the company from scratch, owns a 3.5 per cent stake.
Three general insurance companies — ICICI Lombard, New India Assurance and General Insurance Corporation — got listed on the exchanges last year. ICICI Lombard, with a market share of 8.2 per cent, has a market cap of Rs 35,090 crore while New India Assurance, with a 15.06 per cent market share, has a market cap of Rs 55,718 crore.
Star Health has delivered strong growth in gross premium income and has been successfully maintaining its leadership position among the standalone health insurance companies. It has a market share of 2.75 per cent, when standalone health insurance companies have a total share of 5.5 per cent. There are six standalone companies.
HDFC has announced its plans to enter standalone health insurance space either through acquisition or by floating a company. The sector has been expanding 25-30 per cent annually for the past five years, and needs fresh capital to write new business. The company is looking to book profit of Rs 200 crore, with underwriting profit of Rs 50 crore in the last financial year. It reported a growth of 40 per cent in gross written premium at Rs 4,145 crore in 2017-18, compared with Rs 2,961 crore in the previous year. The company is mainly into retail health, which constitutes 92 per cent of the business, while corporate business accounts for 8 per cent of sales.