Stock to Buy: IIFL Capital Reissues Bullish Buy Call on Star Health With 33% Upside Potential
Leading brokerage firm IIFL Capital has reaffirmed its strong bullish stance on prominent health insurer Star Health and Allied Insurance, issuing a high-conviction 'buy' rating with a 12-month target price of Rs 760. Based on recent trading levels near Rs 575, the target price implies a lucrative potential upside of approximately 33 percent for investors. According to IIFL Capital's comprehensive assessment, Star Health is successfully transitioning away from a phase of volatile performance toward a highly stable and predictable operational trajectory, supported by accelerating premium growth, disciplined underwriting standards, and enhanced cost optimization measures.
Key Growth Drivers: GST Exemptions, Explosive D2C Digital Expansion, and Portfolio Re-Pricing
The brokerage highlights that Star Health's new business momentum has surged significantly following favorable GST exemptions, registering a stellar 37 percent year-on-year growth across FY26 and the opening quarter of FY27. Furthermore, the company's direct-to-consumer (D2C) digital business recorded an extraordinary 142 percent surge in Q1, underscoring successful digital transformation. IIFL notes that India's fundamentally underpenetrated health insurance landscape, combined with Star Health's dominant retail market leadership, positions the insurer to achieve steady mid-teens long-term growth. Operational resilience is further reinforced by strategic portfolio re-pricing covering roughly 80 percent of its products between February and April, which helps mitigate medical inflation and stabilizes the claims ratio around 67 percent.
Operating Leverage, Expense Improvements, and Impressive Historical Stock Performance
Supported by digitalization, growing renewal streams, and rising operating leverage, IIFL estimates that Star Health's expense ratio will improve by 30 to 40 basis points, paving the way for a combined ratio of 97 to 97.5 percent by FY28. Backed by an estimated EPS compound annual growth rate (CAGR) of 31 percent between FY26 and FY29, the stock remains a top pick in the general insurance segment. From a market performance perspective, Star Health—a constituent of the Nifty Smallcap 100 index—has delivered strong multi-month gains exceeding 30 percent over the past year and roughly 24 percent in 2026, despite consolidating sideways over the past month. Having hit a 52-week high of Rs 625 on July 30, 2026, analysts remain optimistic as long as medical inflation and claim metrics are closely monitored.
