Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company will test the stock market waters with its maiden public offer amid high Covid claims and no underwriting surplus.

The insurer has set a price band of Rs 870-900 per share with an issue size of Rs 7,249 crore at the upper price band.

The IPO, which opens on November 30, will be a mix of a fresh issue of equity shares and an offer for sale by existing shareholders .

From the promoter group, Safecrop Investments India llp, Konark Trust and MMPL Trust are looking to lower their stakes in the company.

Apis Groth 6 Limited, Mio IV Star, University of Notre Dame Du Lac, Mio Star, ROC Capital Pty Ltd, Venkatasamy Jagannathan, Sai Satish and Berjis Minoo Desai are among the other selling shareholders.

Jhunjhunwala will retain his stake of around 14 per cent in the company.

The public offer comes at a time the profitability of the general insurance industry and the standalone health insurers are under stress on account of high Covid claims.

However, most insurers have seen a growth in new business premiums as policy sales picked up with increased awareness.

“In the first half of the current fiscal, 28 per cent of the claims incurred and 41 per cent of the claims outgo amounting close to Rs 1,750 crore was on account of Covid pandemic. There was no underwriting surplus in the first half of the fiscal,” said S. Prakash, managing director, Star Health and Allied Insurance.

The insurer has seen 7.5 lakh claims only during the first six months of the fiscal year whereas in the whole of 2020-21 there were 8.25 lakh claims.

Prakash, however, said with rising vaccinations, the impact of Covid claims is expected to come down towards the fourth quarter which will have a positive impact on the bottomline.

In 2020-21, the insurance company posted a net loss of Rs 825 crore against a profit of Rs 268 crore.

The recent weak listing of Paytm has raised concern over IPO pricing, but the company’s management said that the insurer’s business model, market position and growth prospects will make it a prospective investment.

The public offer includes a reservation of shares worth Rs 100 crore for employees.

Proceeds from the fresh issue would be used to augment the company's capital base.

About 75 per cent of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.

Investors can bid for a minimum of 16 equity shares and in multiple thereof.

At present, SBI Life Insurance Company, HDFC Life Insurance Company, ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company are the few insurance companies which are listed on the stock exchanges.