The ₹2,206 crore initial public offer (IPO) of Global Health Limited, which operates and manages hospitals under the Medanta brand opens today. The firm has set a price band of ₹319-336 a share for its issue, which will close on November 7.
The company was founded by Dr Naresh Trehan, who is a renowned cardiovascular and cardiothoracic surgeon, is also the promoter of the company.
Proceeds from the fresh issue will be used to pay debt and for general corporate purposes.
About the IPO
The IPO consists of a fresh issue of equity shares aggregating to ₹500 crore and an offer for sale (OFS) of up to 5.08 crore equity shares.
As a part of the OFS, Anant Investments, an affiliate of private equity major Carlyle Group, and Sunil Sachdeva (jointly with Suman Sachdeva) will offload equity shares.
At present, Anant Investments holds a 25.64 percent stake in Global Health and Sachdeva owns a 13.41 percent stake in the company.
Ahead of the IPO, the firm has raised ₹662 crore from anchor investors. Global Health has decided to allocate 1.97 crore equity shares at ₹336 apiece, aggregating the transaction size to about ₹662 crore.
The anchor investors include--Government of Singapore, Nomura, Axis Mutual Fund (MF), HDFC MF, Aditya Birla Sun Life MF, SBI MF, ICICI Prudential MF, Kotak MF, Max Life Insurance Company and SBI Life Insurance Company. The IPO of the multi-specialty tertiary care provider will end on November 7.
About the firm
Global Health is a leading private multi-specialty tertiary care provider in the north and eastern regions of India. The company has key specialties in cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopedics, liver transplant, and kidney and urology. It is backed by private equity investors like Carlyle Group and Temasek and operates a network of five hospitals under the Medanta brand in Gurugram, Indore, Ranchi, Lucknow and Patna. In addition, one hospital is under construction in Noida.
The company's total installed beds are expected to exceed 3,500 after Noida hospital commences operation in fiscal 2025.
The lot size of Global Health IPO is 44 shares, which at the upper end of its price band comes to ₹14,784. A retail individual investor can submit bids for up to 13 lots or 572 shares by spending ₹1,92,192.
Allotment and listing
The firm will carry out an allotment of shares on November 11, 2022, and the shares are likely to be listed on BSE and NSE on November 16, 2022. KFin Technologies Limited is the registrar to the IPO.
Half of the issue size has been reserved for qualified institutional investors, 35 percent for retail investors and the remaining 15 percent for non-institutional investors.
Book running managers
Kotak Mahindra Capital Company, Credit Suisse Securities (India), Jefferies India and JM Financial are the book-running lead managers to the IPO.
In Q1 of the current fiscal, Global Health reported a 27.1 percent YoY rise in consolidated revenue to ₹617.2 crore. EBITDA and PAT margin both rose by around 90 bps each on a YoY basis. On a TTM basis, the consolidated top-line stood at ₹2,298.3 crore with an EBITDA and PAT margin of 21 percent and 9.3 percent, respectively.
During FY20-22, Medanta's Revenue, EBITDA and Net Profit grew at a CAGR of 20.2 percent, 55.4 percent and 132.4 percent, respectively. The average EBITDA margin is 16 percent, while the PAT margin is 6 percent. The RoE/RoCE was 14.0 percent/9.3 percent.
Let's take a look at what brokerages said about the prospects of the IPO. Most brokerages are bullish on the issue and recommend subscribing to it on the back of strong brand value, cost efficiency, strong financials, robust industry outlook and attractive pricing.
Geojit Financial Services
Geojit has given a subscribe rating for a medium-term to the IPO.
"At the upper price band of ₹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.
“In view of Global Health Limited’s strong clinical expertise, focus on clinical research and academics, focus on under-served areas with dense population, presence in top capital cities of large states, decent brand equity, experienced management team and valuation comfort, we recommend a ‘SUBSCRIBE’ to the issue.”
"At the higher end of the price band, Global Health is demanding an EV/Sales multiple of 4x, which is lower than the peer average. Thus the IPO is attractively priced. Considering the strong long-term structural factors and the anticipated business growth of the company, we assign a 'SUBSCRIBE' rating for the issue," said Choice Broking.
"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 are ~50x and ~23x which indicates that the IPO is suitably priced," said the brokerage.
The growth in the 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," it stated.
“Over FY19-22, Medanta’s operational and financial performance has been strong and weathered the challenge of the pandemic. Upon operation of its Noida hospital, Medanta will have its bed capacity exceed over 3,500 beds which will aid topline and margin expansion. We believe Medanta is being offered at a reasonable valuation of 19.9x FY22 EV/EBITDA and 45.9x FY22 earnings considering peer valuation, strong long-term structural factors and future business growth opportunities in the company. We recommend ‘Subscribe’ to the issue from a long-term perspective.”