Niva Bupa proposes to utilize the net proceeds from the Fresh Issue towards augmentation of its capital base to maintain and strengthen its solvency levels

Niva Bupa Health Insurance is a Mainboard IPO with a book-built issue of Rs. 2,200 crores, with fresh issue of Rs.800 crore and OFS of Rs.1,400 crore. The IPO will open from 07th November 2024 to 11th November 2024, allotment is expected to be done on 12th November, and it will list on BSE and NSE on 14th November 2024. The price band is ₹70 to ₹74 per share, with a minimum lot size of 200 shares, and minimum investment amount of ₹14,800. The book running lead manager is ICICI Securities Limited, Moran Stanley India, Kotak Mahindra Capital, Axis Capital, HDFC Bank, Motilal Oswal Investment Advisors. Kfin Technologies Ltd is the registrar for the issue.

1) They are granular retail health insurer with a focus on delivering robust GWP growth, capital efficiency and profitability. According to the Redseer Report, Niva Bupa is the third largest and the second fastest growing SAHI in India based on overall health GDPI in Fiscal 2024, with a CAGR of 41.37% from Fiscal 2022 to Fiscal 2024. It has demonstrated one of the highest improvements in Expense Ratio for the health segment from Fiscal 2022 to Fiscal 2024, as compared to its private health insurance and public insurer peers.

2) They have Bupa parentage and a brand associated with health insurance and healthcare. Niva Bupa is able to leverage Bupa’s experience in providing healthcare benefits to customers globally in its efforts to innovate new products. Bupa has provided Niva Bupa with guidance in its business processes, through its experience in seeking to institute best international practices. It has developed a customer listening program based on Bupa's customer listening application, where each customer is surveyed about their experience after each service interaction, which helps identify key areas for improvement and put initiatives in place.

3) They have Multi-Channel Diversified Pan-India Distribution, with Technology-Led Empowerment of Distribution Partners. It has a diversified channel mix with Corporate Agents (Banks and others), Individual Agents, and broker channels contributing 27.25%, 32.07% and 27.04% respectively of their business by GDPI for Fiscal 2024. According to the Redseer Report, the average ticket size per policy sold through Niva Bupa’s agency channel (individual agents) is the highest among SAHI peers, at ₹22,895.43 per policy for Fiscal 2023 and the second highest at ₹25,028.35 per policy for Fiscal 2024, signifying an enhanced ability of its agency channel to capture the mass affluent customer segment.

4) They have a Customer centric proposition driving customer experience and retention. Niva Bupa has demonstrated a track record of product innovation, launching products with “industry first” features. It has developed a customer LTV-based approach towards new product creation, which leverages data analytics to determine LTV based on customer profile, claims experience, loss ratio assumptions, inflation, acquisition cost and risk perception.

The following points should be kept in mind:

1) They have incurred losses in FY22, Q1FY25, and Q1FY24 and may not be able to maintain their profitability in the future, which could adversely affect their operations and financial condition and the trading price of their Equity Shares.

2) They are required to meet the mandatory control level of the solvency margin as prescribed under the Insurance Act and they could be subject to regulatory actions and could be forced to stop transacting any new business or change their business strategy, which can slow down their growth.

3) There are outstanding legal proceedings involving their Company and Directors which may adversely affect their business, financial condition, results of operations, cash flows and prospects.

4) If they fail to develop and maintain satisfactory relationships with Network Hospitals, they may not be able to continue to offer cashless claims to their customers and their ability to effectively manage their claims costs may be adversely affected.