ICICI Venture in INR1.2bn health insurance deal

The India-focused private equity and real estate firm's investment in Star Health and Allied Insurance is its maiden deal from India Advantage Fund Series 3.

Mumbai-based ICICI Venture is investing INR1.2 billion (€20 million; $27 million) in Star Health and Allied Insurance, a Chennai-headquartered health insurance company, for an undisclosed stake.
ICICI Venture declined to comment beyond the release.
According to a report in India’s Economic Times, ICICI Venture is leading a consortium including The Carlyle Group and Sequoia Capital to invest about $100 million for a 40 percent stake in Star Health. However, an industry source confirmed with PEI Asia that ICICI Venture is the only firm investing in the company at this juncture and is not part of a consortium. 
Sequoia Capital and Carlyle declined to comment.
The investment will mark ICICI Venture’s first deal from India Advantage Fund Series 3 (IAF Series 3), the firm said in a statement. IAF Series 3 has a target of $500 million and an $800 million hard cap. 
By December 2009, the firm had raised $350 million for the fund from domestic institutions and high net worth individuals. It is now raising capital from overseas investors.
Star Health has collected gross premiums of about $200 million in the current fiscal year, making it the largest private health insurer in the Indian market, the firm said in a statement. Established in 2006, Star Health has more than 140 branches in India. 
“We believe that the Indian health insurance market is poised for an exciting future given the low penetration levels witnessed historically despite a clear underlying consumer need,” Vishakha Mulye, managing director and chief executive officer of ICICI Venture, said in a statement.
The Indian health insurance industry has grown at an annual rate of more than 35 percent since the opening of the sector in 2000, according to ICICI Venture. However, the market continues to remain underpenetrated in India as compared to other countries. For instance, per capital private health insurance in India is estimated to be valued at $1.1 as compared to $2,300 in the US or $63 in Brazil. 
Furthermore, health insurance accounts for less than 3 percent of healthcare spending in India as compared to 5 percent in China. As such, the Indian market is expected to grow rapidly as a result of greater awareness, government spending and increasing healthcare costs, the firm said. Health insurance is also the fastest growing segment in the general insurance market, the firm noted. 
IAF Series 3 is a sector-agnostic fund focused on making both buyout as well as growth investments. ICICI Venture closed IAF Series 2 on $810 million in 2006 and the series’ first fund on $267 million in 2003.