Global Health IPO Opens Today, Should You Subscribe? Check What Brokerage Says

Global Health initial public offering (IPO) with Rs. 2119.3 - 2205.6 Crore issue size is open for subscription now. The IPO will close on November 7, 2022. Global Health price band for the IPO is Rs. 319 to Rs. 336 apiece. It has a face value of Rs 2.

Public issue of 65,641,952 Equity shares of Face value Rs. 2 each, (Comprising of fresh issue of 14,880,952 Equity Shares* (Rs. 500 cr.) and Offer for Sale of 50,761,000 Equity Shares (Rs. 1705.6 cr.*) by Selling Shareholder), according to Ashika Research.

Objects of the Offer

Offer for Sale - The Company will not receive any proceeds of the Offer for Sale by the Selling Shareholder. (up to 50,661,000 equity shares by Anant Investments and up to 100,000 equity shares by Sunil Sachdeva)

Fresh Issue - Investment in two of the Subsidiaries, GHPPL and MHPL, in the form of debt or equity for repayment/prepayment of borrowings, in full or part, of such Subsidiaries (Rs. 375 cr.); and General corporate purposes.

Global Health Ltd

Global Health Ltd. (Medanta) is one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India, with key specialties of cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and kidney and urology. Under the "Medanta" brand, the company has a network of 5 hospitals currently in operation (Gurugram, Indore, Ranchi, Lucknow, and Patna), and 1 hospital (Noida), which is under construction.

Ashika Research Views on IPO - Should Subscribe?

• Medanta is continually looking for value-accretive opportunities while strengthening their presence in the key growth markets. The goal will be to carefully increase the bed capacity in existing facilities as well as consider utilizing the land available for ancillary services, while at the same time complement such expanded bed capacity with improved quality and efficiency of healthcare services, by providing cost-effective care through efficient, optimal utilization of processes, information, technology, research, innovation and other resources.
• The company intends to improve occupancy rates and equipment utilization at hospitals by continuing to maintain and recruit new medical professionals of high caliber in specified fields and focus on clinical excellence. The company also plan to reduce average length of stay in hospitals (ALOS) by continuing to improve clinical practices and use of technology. The company will also look to optimize operations through improving employee productivity and streamlining technology and processes.
• The company plans to further strengthen the collaboration with domestic and international clinical development experts and institutions to continually implement advanced technology to improve the hospitals' offering. The company will endeavour to equip their health-care facilities with state-of-the-art equipment, which is essential in increasing automation wherever appropriate, and ensuring reliability as well as cost competitiveness.
• In terms of Medanta expansion capacity, the number of beds that can be added without significant further major investments in infrastructure is 100 beds at Gurugram Hospital, and 400-500 beds at Lucknow Hospital. In particular, at Gurugram Hospital, the company has a remaining floor area of 103,703.22 square meter available at the Medicity plot as well as an additional land bank of 13 acres available for ancillary services (i.e., residential and guest house). The permitted usage at this additional land bank provides the company with flexibility in complementing their core business
• Medanta is present in major markets which as being under-served in terms of healthcare services i.e. NCR, Lucknow and Patna, which had 1.9, 3.3 and 4.3 beds per 1,000 people, respectively. Barring the momentary setbacks in fiscal 2021, the Indian healthcare delivery industry is estimated to post a healthy 13-15% CAGR between fiscals 2022 and 2026, driven by the long term structural factors, strong fundamentals, increasing affordability and potential of Ayushman Bharat scheme, the national health insurance scheme launched in 2018 to provide access to healthcare for low-income earners in India. Their presence in these under-served markets present them with great potential to expand their offering and improve the healthcare infrastructure, which their developing hospital in Lucknow and planned hospital in Patna aim to target.
• On financial front, during FY20-22, Medanta's Revenue, EBITDA and Net Profit grew at a CAGR of 20.2%, 55.4% and 132.4%, respectively. Average EBITDA margins is ~16%, while PAT margins is ~6%. The RoE/RoCE were 14.0%/9.3%. For Q1FY23, revenue stood at Rs. 617 cr and EBITDA margin was 21.4%.
• In terms of the valuations, on the higher price band, Medanta demands a P/E multiple of 38.4x based on Q1FY23 post issue fully diluted EPS and EV/EBITDA multiple of 18.3x based on Q1FY22 post issue fully diluted EBITDA. The industry P/E and EV/EBITDA is ~50x and ~23x which indicates that the IPO is suitably priced.
• The growth in healthcare segment, good patient volumes, cost efficiency , strong financials, expansion to new services and diversifying to new areas, will drive the company's performance going forward. Hence, we recommend to "SUBSCRIBE" the issue from the long term perspective.

Geojit has given a subscribe rating for a medium term to the IPO.

"At the upper price band of Rs 336, Medanta is available at a P/E of 46x (FY22 EPS), which is in-line compared to its peers. Considering its strong brand value, new hospital addition, rise in ARPOB, pick up in medical tourism, increasing affordability for healthcare services and promising industry outlook, we assign a 'Subscribe' rating on a short to medium term basis," said Geojit.

Disclaimer

Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, and the author are not liable for any losses caused as a result of decisions based on the article.