MUMBAI (BLOOMBERG) – Shares of Star Health and Allied Insurance will list in Mumbai on Friday (Dec 10), the first test since Paytm’s debut last month to gauge investor enthusiasm for richly valued stocks that offer poor prospects for near-term profitability.

The firm’s initial public offering fell short of target as investors questioned whether the top price of 900 rupees (S$16.24) was justified after Star Health swung to a loss in the year ended March 2021. The Covid-19 pandemic has boosted insurance claims and Amarjeet Maurya, an analyst at Angel One, said Omicron may extend the company’s losses into the year through March 2023.

“There is going to be a 60-70 rupee discount to the IPO price as things stand today,” Sudip Bandyopadhyay, a strategist at Inditrade Capital said on Thursday. “It’s a combination of many things, from business model, profitability to pricing.”

Investors are turning increasingly skeptical about IPOs as a record year for Indian listings draws to a close. Backed by billionaire Rakesh Jhunjhunwala and his wife Rekha, Star Health raised US$848 million (S$1.16 billion) rather than the US$975 million it sought, inviting scrutiny to its trading debut. Investors are also wary as shares of One 97 Communications, operator of the digital payments service Paytm, are down about 25 per cent since its Nov 18 debut versus a 2.1 per cent drop for the benchmark index.

On Tuesday, pharmacy chain Medplus Health Services slashed its IPO size to US$186 million from US$219 million planned, ahead of the start of its subscription next week.

Indian IPOs that have raised at least US$500 million this year have risen an average 17 per cent on their first day of trade, data compiled by Bloomberg show. Of the 10, half notched a first-day gain, including food delivery startup Zomato and beauty retailer FSN E-Commerce Ventures.