Mumbai: Ace investor Rakesh Jhunjunwala led consortium has agreed to acquire Star Health and Allied Insurance valuing the company at Rs 6,500 crore, according to a recent media reports.
The consortium comprises of billionaire investor Rakesh Jhunjunwala, WestBridge Capital and Madison Capital have signed definitive agreements with the shareholders of Star Health and Allied Insurance Co to purchase their stock in the company.
ET reports that Rakesh Jhunjhunwala will hold 34 percent, WestBridge will hold 50 percent and Madison will take 11.1 percent stake in the company while the remaining 4.9 percent is under dispute and will remain with two shareholders of Dubai-based ETA Trading.
Confirming the deal Sumir Chadha, managing director, WestBridge Capital told ET, “We believe the retail health insurance industry will continue to grow at a healthy pace in the coming decade, driven by increasing penetration. This aligns well with WestBridge’s investing philosophy and long-time horizon. We are highly confident of Star’s business model and believe that Star will continue to lead the retail health insurance space.”
Speaking with ET Rakesh Jhunjhunwala said, “The management of Star Health has built its leadership position in private health insurance through innovation, perseverance, and excellence. I believe health insurance is a key tool for every citizen towards financial stability. I am proud to be associated with Star Health and believe it is best equipped to serve the country’s health insurance needs.”
V Jagannathan, Star Health chairman told ET, “We have started from a humble beginning and have come to this level with an excellent team work. The transaction is subject to regulatory and certain other approvals.”
Current investors in the company include Sequoia Capital, ICICI Venture Tata Capital, private equity investor Apis, who along with Oman Insurance Co, own 70 percent of Star Health. The deal will give investors a six-fold return, it’s estimated, adds the daily
The sale process involved 12 bidders including private equity giants Bain Capital and Warburg Pincus apart from private sector insurer HDFC Ergo. However, the Rakesh Jhunjhunwala led consortium, Premji Invest in partnership with Prudential and private sector general insurance company ICICI Lombard was the final three bidders.
Read also: ICICI Lombard frontrunner for Star Health
KPMG partner Sanjay Doshi told ET, “The insurance sector is poised for consolidation given the number of players and the challenges on scaling the business, especially for small-sized players. There is good interest from investors for the right platform, especially with niche capabilities or efficient distribution. With large players becoming profitable, the opportunity to get listed is a key driver for acquisition and consolidation.”
The Chennai based Star Health is founded by V Jagannathan, former head of state-owned United India Insurance in 2006 and employs more than 11,000 people providing insurance coverage to one crore lives as on March 31, 2018.