The Niva Bupa Health Insurance IPO

Hello Reader! Some of the world’s top investors, like Warren Buffett and Rakesh Jhunjhunwala, have long been drawn to insurance companies. Why? Insurance brings in steady revenue through customer premiums, it plays an essential role in people’s lives, and it's an industry often ignored by most. Jhunjhunwala, for example, invested heavily in Star Health, one of India’s top health insurers.

So, why the buzz around health insurance in India? The industry has been booming, growing by 20% each year from 2018 to 2024. Now, there’s even more attention with Niva Bupa Health Insurance — one of India’s leading health insurance companies — about to go public with its IPO (Initial Public Offering) ending on Monday.

But what does this really mean, and how does health insurance work anyway? Let’s break it down.

How Health Insurance Works

Health insurance is a straightforward concept. You pay a premium, and the insurer promises to cover your medical costs if you need it. But behind this simple idea lies a careful balancing act. Health insurers need to make sure they’re collecting enough in premiums to pay out claims and still make a profit. That’s where companies like Niva Bupa try to stand out.

Niva Bupa’s Rapid Growth

Niva Bupa is one of India’s biggest and fastest-growing health insurers. By March 2024, it covered over 14 million people and held 17% of the market. In two years, its revenue nearly doubled, jumping from ?1,884 crores in 2022 to ?4,118 crores in 2024, with a remarkable 45% growth rate. The best part? It turned profitable along the way.

Niva Bupa isn’t just sticking to insurance, though. It’s expanding into other healthcare areas like diagnostics, wellness programs, online consultations, and even medicine delivery. The goal? To become a complete healthcare provider, not just an insurance company.

But this growth and expansion needs funds, and that’s why Niva Bupa is turning to the public with its IPO.

Why Go Public Now?

In India, the Insurance Regulatory and Development Authority (IRDAI) requires all insurers to keep a "solvency ratio" of at least 1.5, which is a measure of financial health. By March 2024, Niva Bupa’s solvency ratio was 2.6, which is great. But to fuel its big plans, it needs more money. From this IPO, Niva Bupa plans to put ?800 crores toward growing its capital and increasing its financial stability.

Right now, only about 30% of Indians have health insurance, so there’s huge room for growth. Going public will give Niva Bupa the funds it needs to reach more people, launch new products, and boost its brand recognition.

Is Niva Bupa’s IPO a Good Deal?

Now, let’s talk about the numbers. At the top end of its price range — ?74 per share — Niva Bupa’s price-to-book (P/B) ratio is 6.1x, valuing the company at around ?13,500 crores. Some investors think this price is high compared to larger competitors, but others see it as a fair premium for growth potential.

Comparing it to Star Health, a larger competitor with about 30% of the market, shows that Niva Bupa still has room to grow. However, Niva Bupa’s focus on wellness, diagnostics, and digital health could give it a unique edge.

Valuing insurance companies can be complex, though. Investors look at cash flow, investments, and the ability to cover claims. Basically, they want to ensure the premiums collected will cover future payouts and still leave a profit.

The Growth, Challenges, and Valuation of Niva Bupa

Niva Bupa’s revenue from policy sales, known as the Gross Written Premium (GWP), has grown quickly, up 41.3% between 2022 and 2024. But there’s some volatility; Niva Bupa was profitable in 2024 but posted losses in the first quarter of 2025. This may concern cautious investors, but long-term thinkers might see it as a normal part of fast growth.

A key measure for insurers is the "Combined Ratio," which adds up claim and expense ratios to show cost efficiency. Insurers aim to keep this below 100%, meaning they spend less than they earn. Niva Bupa’s Combined Ratio improved from 107% in 2022 to 97% in 2023, though it slightly rose to 99% in 2024. This shows cost control, but it’s not all perfect.

For example, Niva Bupa’s claim settlement ratio — the percentage of claims it pays out — was 91% in 2024, lower than the industry average of 96%. Also, with fewer hospital partnerships than competitors like ICICI Lombard or HDFC Ergo, Niva Bupa may need to offer lower prices and higher commissions to attract customers, which has led to high expenses. In fact, its expense ratio from 2022 to 2024 was 43%, one of the highest in the industry.

So, Should You Invest in Niva Bupa’s IPO?

If you’re interested in the insurance industry but unsure about Niva Bupa, you could consider other companies with stakes in established insurers, providing a bit more diversification. But if you’re optimistic about the growth of health insurance in India and Niva Bupa’s potential, this IPO could be worth considering.

Two main factors matter for health insurers: credibility and fair pricing. While Niva Bupa’s IPO valuation has some investors cautious, the health insurance market in India is still growing rapidly. And with Niva Bupa’s ambition to go beyond insurance into a full healthcare ecosystem, there’s a unique opportunity here.

At the end of the day, this IPO is a bet on a fast-growing sector and on Niva Bupa’s plans to reshape healthcare. So, are you ready to make a move, or will you wait and watch?

? Coming up next week!

Tuesday, November 12:

• UK Unemployment Rate: August’s unemployment rate dropped to 4.0% from 4.1%. September’s data is expected.
• India Industrial Production: Fell by 0.1% year-on-year in August, a drop after July’s 4.7% growth. September figures will be released.
• India Manufacturing Production: Increased by 1% year-on-year in August, the lowest since October 2022. September’s data to be announced.
• India Inflation Rate MoM: The CPI rose 0.6% in September after being flat in August. October’s figures are awaited.

Wednesday, November 13:

• US Inflation Rate MoM: Rose 0.2% in September, slightly above the 0.1% forecast. October’s numbers are expected.
• Euro Area Industrial Production MoM: Increased by 1.8% in August, rebounding from July’s 0.5% drop. September’s data will be released.

Thursday, November 14:

• UK GDP Growth Rate: Expanded by 0.5% in Q2 2024, down from Q1’s 0.7%. The preliminary Q3 reading is expected.
• UK Monthly GDP MoM: Increased by 0.2% in August after flat growth in June and July. September’s data is awaited.
• US Initial Jobless Claims: Claims fell by 12,000 to 216,000 for the week ending October 26. November 2 data will be released.
• US PPI: Core producer prices increased 0.2% in September, down from 0.3% in August. October’s data to be announced.

Friday, November 15:

• China Industrial Production: Grew by 5.4% year-on-year in September, up from August’s 4.5%. October’s figures are expected.
• India Foreign Exchange Reserves: Fell to $684.8 billion as of October 25, marking the fourth consecutive weekly decline. November 1 data will be awaited.
• US Industrial Production MoM: Fell by 0.3% in September, more than the 0.2% drop forecast. October data to be released.

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Chakravarthy V. wrote for Mint How to plan a secure retirement with fixed-income and low-risk funds? | Mint

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