The ₹687 crore initial public offering (IPO) of Yatharth Hospital and Trauma Care Services (Yatharth) opened for subscription on Wednesday, 26 July. The issue, which has a price band of ₹285-300 per share, will close for subscription on Friday, 28 July.
About the issue: Yatharth Hospital IPO consists of a fresh issuance of shares for ₹490 crore and an offer by the promoters Vimla, Prem Narayan, and Neena Tyagi to sell 65.51 lakh equity shares.
Subscription status: Yatharth Hospital IPO has seen a decent response, subscribed 60 percent till 2:20 pm on Day one of bidding. It has received bids for 95.35 lakh shares against 1.60 crore shares on offer. The category for Qualified Institutional Buyers (QIBs) had yet to see any subscriptions. However, the non-institutional investor and retail investor portions were subscribed 84 percent each.
GMP: The company's shares in the grey market are trading at a healthy premium of ₹55, indicating a decent response for the issue.
However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.
Objective: Yatharth Hospital intends to use the net proceeds to pay off or advance debt, fund capital expenditure expenses for the company's two hospitals, Noida Hospital and Greater Noida Hospital, as well as for the hospitals run by the company's subsidiaries AKS and Ramraja. Additionally, it also intends to fund inorganic growth initiatives through acquisitions and general corporate purposes.
Lot size: Bids can be made for a minimum of 50 equity shares and in multiples of 50 equity shares thereafter.
Anchor investors: Yatharth Hospital IPO raised ₹205.96 crores from 18 anchor investors at the upper price band of ₹300 per equity share on Tuesday, July 25, ahead of the IPO. These include SBI Life Insurance Company, Goldman Sachs (Singapore), Kotak Mahindra Life Insurance Company, ICICI Prudential Mutual Fund, Max Life Insurance Company, HDFC MF, and BNP Paribas Arbitrage, among others.
Reservation: Yatharth Hospital IPO has reserved not more than 50 percent of the shares in the public issue for Qualified Institutional Buyers (QIB), not less than 15 percent for Non-Institutional Investors (NII), and not less than 35 percent of the offer is reserved for Retail Investors.
About the firm: Incorporated in 2008, Yatharth Hospital and Trauma Care Services Limited (YHL) is a multi-care hospital chain. They rank among the top 10 largest private hospitals in the National Capital Region of Delhi. Yatharth Hospital presently operates three super specialty hospitals situated in Delhi NCR, i.e., at Noida, Greater Noida, and Noida Extension, Uttar Pradesh. Further, Noida Extension Hospital has 450 beds and is one of the largest hospitals in the area.
To extend its operations and services, the company acquired a 305-bedded multi-specialty hospital in Orchha, Madhya Pradesh. This too is among the largest hospital in the locality. A team of 370 doctors is engaged with the company. They offer healthcare services across numerous specialties and super specialties.
Financials: The company's revenue from operations grew at a CAGR of 51 percent over FY21-FY23 from ₹229 crore to ₹520 crore in FY23 led by a rise in in-patient volumes (46 percent CAGR over same period), bed occupancy levels and an increase in average revenue per occupied bed. Its EBITDA grew at 41 percent CAGR over FY21-23 and maintained a stable EBITDA margin of 27.6 percent (3-yr Average) over the same period, led by better operational efficiencies. The RoE also remained healthy at 33.6 percent over FY21-23. The current debt-to-equity ratio is at 1.5x in FY23. Post IPO, by repaying ₹245 crore, the debt–equity ratio will be reduced to 0.03x.
Important dates: The allotment will be finalised on Wednesday, 2nd August, and the company will initiate refunds on Thursday, 3rd August, while the shares will be credited to the Demat account of allottees on Friday, 4th August. The firm is likely to be listed on BSE and NSE on Monday, 7th August.
Book running managers: Intensive Fiscal Services Private Ltd, Ambit Private Ltd, and IIFL Securities are the issue's book-running managers whereas Link Intime India Private Ltd is the registrar to the public offer.
Should you subscribe?
Most brokerages have a ‘subscribe’ rating on the issue on the back of reasonable valuations, healthy financials, stable margins, strategic acquisition, and promising industry outlook. Here's what they said.
Reliance Securities: Subscribe
On FY23 financials, the IPO is valued at 39.2x P/E, 20.9x EV/EBITDA and 5.4x EV/Sales. India’s current healthcare expenditure is largely dominated by private expenditure. North India regions including Haryana, Uttar Pradesh and Uttarakhand have lower than average doctor and nurse density per 10,000 population. This is expected to improve going ahead while favouring the company’s expansion plans. Their recent acquisition of the Jhansi-Orchha hospital is aimed at further expanding into new geographies and growing their presence in the regional healthcare market. They intend to focus on building capabilities for new, more advanced specialties which have high demand in the respective micro markets and deliver a higher ARPOB. In view of strong financials, growth potentials in Northern India, debt-free company post IPO proceeds, and advanced and patient-friendly facilities, we give a ‘SUBSCRIBE’ to the issue.
HEM Securities: Subscribe
The company is bringing the issue at a price band of ₹285-300 per share at P/E multiple of 39.16x on post issue FY23 basis. The company is among the leading super-specialty hospital in Delhi NCR with diverse specialty and payer mix. Also, the company has advanced and high-end medical equipment and technology with a track record of stable operating and financial performance and growth. Hence, we recommend “Subscribe” on the issue.
Geojit Financial Services: Subscribe for long term
At the upper price band, Yatharth is available at a P/E of 39.2 times, based on FY23 EPS, which appears to be reasonably priced compared to its peers. Considering its consistent topline growth, stable margins, strategic acquisition, revival of medical tourism, and promising industry outlook, we assign a 'subscribe' rating on a medium to long-term basis.
Hensex Securities: Subscribe
Yatharth is among the leading super specialty hospitals in Delhi NCR and operates three super specialty hospitals in Delhi-NCR with diverse specialty and payer mix. It has an experienced and qualified professional management team with a strong execution track record. It has a track record of stable operating and financial performance and growth.
Canara Bank Securities: Subscribe for listing gains
Yatharth has a bed capacity of 1405 beds out of which 394 beds are engaged for critical care. Prices of the hospitals are 20 percent cheaper than peers to make their brand known among people. They have expansion plans near parts of Uttar Pradesh and Delhi. They have reported robust financial performance across the major parameters.
This issue is available at a P/EPS of 29.73 times, which is lower as compared to peer competitors. This cannot be an apple-to-apple comparison, as this hospital is mainly concentrated in Delhi and they are emerging as a multi-specialty hospital among renowned peers. Their revenue contributes majorly 34 percent from government deals which can stretch the debtor days and margin.
Choice: Subscribe with caution
Around 80 percent of YHTC’s operating beds are present in a highly competitive market of the Delhi-NCR region. Ramraja Hospital is operating at lower bed occupancy levels and is currently loss-making. Thus we are cautiously optimistic about the medium-term performance of the company. At the higher price band, YHTC is demanding a P/E multiple of 39.2x (to its FY23 earning), which seems to be in line with the peer average. Considering the above observations, we assign a “Subscribe with Caution” rating for the issue.
SMC Global: 2/5 stars
YHTCSL is empanelled with several third-party health insurance administrators, non-life insurance companies, ESIC (Employees State Insurance Corp.), CGHS (Central Government Health Schemes) as well as public and private sector undertakings. YHTCSL's Noida Extension and Greater Noida hospitals are the 8th and 10th largest private hospitals and are having a major thrust on introducing new specialties in healthcare services to remain at the forefront. Based on its current financial status, the issue appears fully priced.