VC Circle

Chennai-based Star Health and Allied Insurance Co. Ltd has firmed up plans for a large equity funding round that would involve existing and new investors, two people privy to the development told VCCircle.
 
The standalone insurer is working with the investment banking arms of Kotak Mahindra Bank and CitiBank to raise about $300 million (about Rs 2,190 crore).
 
About two-thirds of the capital would come from existing investors which include WestBridge Capital, Madison Capital and billionaire investor Rakesh Jhunjhunwala.
 
The fundraising process was started in the last quarter of 2020, one of the persons said.
 
Separate queries sent to Star Health and the investment banking firms didn’t elicit any response immediately.
 
Early last year, ROC Partners, a Sydney-based investment firm acquired about a 2.4% stake in the insurance company. It bought this stake from Sequoia Capital, an early investor in Star Health.
 
ROC Partners, created through a management buyout of Macquarie’s private markets business unit five years ago, has an active presence in the Asia-Pacific with a fund-of-funds management business besides a secondary transactions and co-investment practice.
 
Star Health has a history of attracting private equity money starting with ICICI Venture and Sequoia Capital around a decade ago. The insurance company also saw Tata Capital Growth Fund and Apis Partners come in as investors.
 
In 2018, a consortium of WestBridge, Madison and Jhunjhunwala acquired Star Health.
 
Safecrop Holdings Pvt. Ltd, the buyers' consortium, signed definitive agreements to acquire the insurer from shareholders including Star Health Investments Pvt. Ltd, and private equity firms ICICI Venture, Tata Capital and Apis Partners.
 
The co-investors in this deal include endowment funds of MIT and University of Notre Dame.
 
Apis Partners, which had invested in Star Health in 2016, retained a minority stake in the insurer.
 
Sequoia had originally backed the insurer via Star Health Investments Pvt. Ltd. This entity now stands dissolved and it appears Sequoia swapped its stake for a direct holding in Star Health, which is now being offloaded.
 
Chennai-based Star Health is the largest health insurance company in India with a market share of 4.28% as of November 2020. Founded in 2006, it provides health insurance, overseas mediclaim and personal accident policies.
 
Star Health, which underwrote a gross written premium of Rs 6,865 crore during 2019-20, had a net worth of Rs 1,889 crore as on 31 March last year.
 
Currently, it has over 12,800 employees and 640 branch offices all over India.
 
As per information on its website, the company reported Rs 1,481 crore in net premiums earned in the quarter ended September 2020, compared with Rs 1,034 crore in net premiums earned in the same quarter the previous year.
 
According to VCCEdge, the company recorded net sales of Rs 330 crore with a profit after tax of Rs 263 crore for the year ended March 2020. In the previous year, it reported net sales of Rs 229 crore with PAT of Rs 263 crore.