After successfully concluding a substantial ₹2,320 crore one-time settlement (OTS) for Religare Finvest, the parent company, Religare Enterprises, appears to have initiated the process for an initial public offering (IPO) for its health insurance subsidiary, Care Health Insurance.

Insiders with knowledge of the matter reveal that Care Health Insurance has extended invitations to investment bankers to present their pitches for the IPO mandate. These pitches for Care Health Insurance's IPO are anticipated to unfold over the next month. Notably, Care Health Insurance specializes in providing a range of insurance policies, including health, travel, and personal accident coverage.

A significant portion of Care Health Insurance's financial portfolio is attributed to health-related coverage, contributing 91% to the Gross Domestic Premium Income (GDPI) and 88% to the Net Earned Premium (NEP). In a breakdown, travel insurance contributes 2.4% of GDPI and 3.4% of NEP, while personal accident (PA) coverage constitutes 6.2% of GDPI and 8.5% of NEP for Care Health Insurance.

Sources familiar with the situation suggest that the IPO for Care Health Insurance could potentially raise between ₹1,500-2,000 crore, with an expected equity dilution ranging from 15-20%. The IPO is likely to include both secondary and primary sales of shares. Funds generated from the primary sale are earmarked for bolstering solvency and providing growth capital to the health insurer. As of Q2FY24, Care Health Insurance's solvency stood at a commendable 1.73 times, surpassing the regulatory minimum requirement of 1.5 times.

Additionally, insiders indicate that Religare Enterprises aims to reduce its stake through the IPO, raising funds in the process. Other investors are also exploring options to divest their stake through the IPO.

Religare issued a statement emphasizing their primary objective to create value for stakeholders and customers. They clarified that news regarding the initiation of work on Care Healthcare Insurance IPO is market speculation, adhering to their policy of not commenting on market speculation.

In summary, the potential IPO for Care Health Insurance emerges as a pivotal financial move, following Religare Enterprises' successful OTS, signaling a strategic evolution within the company and the broader insurance sector.