Niva Bupa Health IPO subscribed 84% on Day 2 so far, Retail portion fully booked

The initial public offering (IPO) of Niva Bupa Health Insurance Company saw a decent response from the investors during the third day of the bidding process. The issue, which kicked-off for bidding on Thursday, November 07, was overall subscribed 65 per cent on day one.

Delhi-based Niva Bupa Health Insurance is selling its shares in the price band of Rs 70-74 apiece. Investors can apply for a minimum of 200 shares and its multiples thereafter. It is looking to raise Rs 2,200 crore via IPO, which includes a fresh share sale of 800 crore and offer-for-sale (OFS) of up to 189,189,189 equity shares worth Rs 1,400 crore.

According to the data from BSE, the investors made bids for 14,43,58,400 equity shares, or 84 per cent, compared to the 17,28,57,143 equity shares offered for the subscription by 1.05 pm on Friday, November 08. The three-day bidding for the issue will conclude on Monday, November 11.

The allocation for retail investors was subscribed 1.12 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 36 per cent. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids 98 per cent for their allocations as of the same time.

Incorporated in 2008, Niva Bupa Health Insurance Company is a joint venture between the Bupa Group and Fettle Tone LLP that provides insurance in the health sector. It offers a holistic proposition by providing customers access to a comprehensive health ecosystem and service capabilities through its Niva Bupa Health mobile application and website.

Niva Bupa Health Insurance Company is commanding any grey market premium (GMP) so far. There has been no activity in the unofficial market for counters. However, the GMP of other issues in the unofficial market has remained dull, indicating less interest in the primary markets.

Brokerages mostly have a positive view on the issue and suggest subscribing for a long term citing rising demand of healthcare products, strong market share and robust growth potential. However, rising competition, inconsistent numbers and aggressive valuations may dent its sentiments.

Niva Bupa Health has positioned itself as India’s third largest and second fastest-growing standalone health insurer. It focuses on high-LTV retail products with an increasing average ticket size and expansion in active lives insured. Operational efficiencies have improved, with a reduced claims ratio and expense of management, driving profitability to Rs 81.85 crore in FY24, said Arihant Capital Markets.

"Strategic expansion across India and digital channel growth, supported by the e-agency model, further strengthen its retail health market reach. At the upper band of Rs 74, the issue is valued at a PBV ratio of 6.1 times based on a FY24 BV of Rs 12.06. We are recommending a 'subscribe for long term' for this issue," it said.

Niva Bupa Health Insurance Company reported a net loss of Rs 18.82 crore with a revenue of Rs 1,124.90 crore for the quarter ended on June 30. The company clocked a net profit of Rs 81.85 crore with a revenue of Rs 4,118.63 crore for the financial year ended on March 31, 2024. The company will command a total market capitalization of Rs 13,380 crore.

Niva Bupa Health Insurance Company has reserved 75 per cent of the net for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the offer. Remaining 10 per cent of the net offer shall be allocated towards the retail investors.

Niva Bupa has demonstrated robust growth, achieving a 44 per cent YoY in revenue for FY24. The gross written premium (GWP) increased by 37.7 per cent to Rs 5,607 crore in FY24 from Rs 4,073 crore in FY23. In Q1FY25, it posted a loss of Rs 18.8 per cent narrowing from a loss of Rs 72.2 per cent in the year-ago period. The insurance industry has a high gestation period, said Geojit Financial Services.

"Robust increases in commission cost in recent years pose a risk for the continuity of improvement in future market share. It will be trading at a post-issue adjusted P/B ratio of 4.8 times 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," it said.

ICICI Securities, Morgan Stanley India, Kotak Mahindra Capital, Axis Capital, HDFC Bank and Motilal Oswal Investment Advisors are the book running lead managers of the Niva Bupa Health Insurance IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE on Thursday, November 14.