Niva Bupa Health Insurance Company Limited IPO: Check IPO Date, Lot Size, Price & Details

Introduction:

Niva Bupa Health Insurance Company Limited was founded in 2008, and it is a joint venture between Bupa Group and Fettle Tone LLP, focused on providing health insurance solutions. The company offers a full range of health services, enhancing customer experience via the Niva Bupa Health mobile app and website. In June 2011, it became the first health insurer in India to implement a real-time Integrated Grievance Management System.

Niva Bupa provides a variety of retail plans for individuals and families, as well as group insurance options for businesses. As of June 30, 2024, it covered 14.99 million active lives across 22 states and four union territories in India. It partners with over 10,000 hospitals across India, enabling cashless claims to be processed in under 30 minutes.

IPO Details:

IPO Date

7th Nov-2024 to 11th Nov-2024

Face Value

₹ 10/- per share

Price Band

₹ 70 to ₹ 74 per share

Lot Size

200 shares and in multiples thereof

Issue Size

₹ 2,200 crores

Fresh Issue

₹ 800 crores

OFS

₹ 1,400 crores

Expected Post Issue Market Cap (At upper price band)

₹ 13,380.91 crores

Objectives of Issue:

  • The company will utilize the net proceeds to maintain the solvency ratio. - The company intends to use the net proceeds from the fresh issue to strengthen its capital base, ensuring it maintains and enhances its solvency ratio.
  • General Corporate Purposes. - The remaining funds from the fresh issue will be allocated to general corporate purposes, providing flexibility for future operational needs and supporting strategic initiatives.

Key Strengths:

  • Growth: The company commands a substantial 16.24% market share in the standalone health insurance space, making it one of the prominent players in the sector. With a remarkable 41.27% compound annual growth rate (CAGR) in Gross Written Premium (GWP) from FY22 to FY24, it has outperformed industry norms. This strong growth trajectory reflects the company’s effective expansion in health insurance offerings and its ability to attract a growing customer base.
  • Robust Distribution Network: Niva Bupa boasts a comprehensive, multi-channel distribution framework that includes agents, brokers, bancassurance alliances, and direct sales channels. This broad and diverse network enhances its market reach, supporting efficient customer acquisition and engagement across various touchpoints.

Risks:

  • Regulatory Risks: Niva Bupa, like all insurers, must adhere to regulatory standards that can impact its capital structure and operational flexibility. Changes in solvency or capital requirements may affect future operations. Additionally, any regulatory actions by IRDAI or issues with distributors could harm the company’s reputation and business performance.
  • Persistent Profitability Constraints: Although Niva Bupa shows strong revenue growth, its profitability remains challenged. For FY24, profit after tax was ₹81.85 crore, with a Return on Net Worth of 5.68%. As a lower-margin player compared to industry leaders, the company’s valuation may be questioned, especially if medical costs and claims exceed estimates.
  • Competitive Market: Niva Bupa’s expansion depends on its ability to compete, increase market share, and control costs amid rising competition. The Indian health insurance sector is highly competitive, with numerous public and private insurers. Growing competition may pressure Niva Bupa's market position and profitability over time.

Financial Snapshot:

The company demonstrated an impressive 41.27% compound annual growth rate (CAGR) in Gross Written Premium (GWP) from FY22 to FY24, outpacing industry standards. With a robust solvency ratio of 2.39, its financial stability appears solid. Revenue doubled in FY24 compared to FY22, reflecting substantial growth of 119%.

However, a high claims ratio poses challenges to profitability. Niva Bupa Health Insurance reported a net loss of ₹18.82 crore on revenue of ₹1,124.90 crore for the quarter ending June 30, 2024. For the fiscal year ending March 31, 2024, it achieved a net profit of ₹81.85 crore on revenue of ₹4,118.63 crore. While the company returned to profitability in March 2023, recent quarterly losses underscore fluctuating profits, creating uncertainty around sustaining cost control and profitability over time.

Metrics

As of June 30, 2024

As of June 30, 2023

As of March 31, 2024

As of March 31, 2023

As of March 31, 2022

Net Worth

20,317.72

9,578.17

20,495.90

8,311.23

5,076.45

Assets Under Management

56,744.43

37,375.54

54,582.31

33,660.95

24,013.15

Profit/(loss) after tax

-188.21

-721.98

818.52

125.4

-1,965.25

Gross Written Premium

14,641.76

11,190.43

56,075.74

40,730.31

28,099.71

Net Written Premium

11,515.98

8,850.64

44,209.51

31,831.07

21,576.28

Expense Ratio

42.05%

42.75%

39.77%

43.20%

45.40%

Retention Ratio

78.65%

79.09%

78.84%

78.15%

76.78%

Solvency Ratio (times)

2.39

1.74

2.55

1.67

1.72

Combined Ratio

106.08%

108.19%

98.79%

97.25%

107.52%

Claims Ratio

64.03%

65.44%

59.02%

54.05%

62.12%

(Rs. In Million)

Conclusion

The health insurance sector is projected to grow at a CAGR of 15-17% from FY24 to FY30. Government initiatives, such as the Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), promote financial inclusion, creating favorable growth conditions for the company.

Niva Bupa demonstrated a positive shift in profitability, moving from a net loss of ₹1,965.3 million in FY22 to a net profit of ₹818.5 million in FY24. However, recent losses in Q1FY25 highlight inconsistent profitability, which could impact stable business operations. Additionally, any increase in the claims ratio could put further pressure on profitability.

Considering the industry's intense competition, unstable profits, and uncertain claims ratio, we recommend avoiding this IPO at present. Monitoring the company’s performance in upcoming quarters may provide better clarity for future investment decisions.

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