Star Health and Allied Insurance Company is expanding its capital base. Two private equity funds, ICICI Ventures and Sequoia Capital, will be picking up stake in the Chennai-based stand-alone health insurance company.

 

Sources said that ICICI Ventures has already put in Rs 100 crore and will invest a further Rs 20 crore. The deal with Sequoia Capital is at an advanced stage. The fund will invest Rs 130 crore.

 

The infusion will take the company's capital base to Rs 450 crore.

 

The stakes that these two companies will be taking in Star Health, it is understood, will be based on a formula and depend on the financial performance of the company.

 

Star Health was promoted by Dubai-based investors and Mr V. Jagannathan, an insurance professional and a former Chairman and Managing Director of public sector United India Insurance.

 

Star Health, which commenced operations in May 2006, ended last year with a premium income of Rs 975 crore and a pre-tax profit of Rs 15 crore. It has today 150 offices across the country and plans to open 70 more this year.

 

Sources said that current year's business is buoyant too — the company has earned premium income of Rs 536 crore as on date. They expect Star to end the year with premium income of at least Rs 1,250 crore.

 

Sources note that the investment being made by the two funds into the health insurance sector underscores the point that the business is profitable. The Indian health insurance market is about Rs 8,000 crore. Between 2002-03 and 2008-09, health insurance premiums grew six fold from Rs 1,002 crore to Rs 6,625 crore , when the industry's total premium grew 124 per cent during the same period.

 

Research firm RNCOS, in its April report ‘Booming Health Insurance in India', said that between 2009-10 and 2013-10, the health insurance premium would grow at a compounded annual growth rate of 25 per cent.