IPO Analysis: Jupiter Life Line Hospitals Limited

IPO Rating: Apply for long-term

About the Issue 

Established in 2007, Jupiter Life Line Hospitals Limited has emerged as a prominent healthcare institution, specialising in multiple medical disciplines and offering tertiary and quaternary healthcare services across the Mumbai Metropolitan Area (MMR) and the western region of India. 

The company is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Rs 10. The IPO price range is set between Rs 695 and Rs 735 per equity share, resulting in a total issue size of Rs 869.08 crore at the upper price band. 

The IPO is scheduled to commence on September 6, 2023, and will conclude on September 8, 2023. The anticipated listing on the exchange is set for September 18, 2023. The market lot size for the IPO is 20 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 260 shares or a total investment of Rs 191,100, assuming the upper price band. 

Objects of the Issue 

The company plans to allocate the net proceeds raised from the issue for the following purposes: 

1. Repayment or pre-payment, either in full or in part, of loans obtained from banks by the company and its material subsidiary. 

2. Meeting general corporate requirements and expenses. 

Promoter holding 

The promoters currently hold a pre-issue shareholding stake of 40.69 per cent in the company. 

Company profile 

The inaugural Jupiter Hospital is strategically located near the pivotal Eastern Express Highway in Thane, ensuring convenient access and connectivity for patients from Thane and beyond. Expanding its reach, Jupiter Hospital ventured into Pune in 2017, and subsequently, in 2020, extended its multi-speciality tertiary and quaternary care services to Indore, Madhya Pradesh, with the establishment of Vishesh Jupiter Hospital. As of today, the hospital network boasts over 1100 beds across three cities. These hospitals employ a Greenfield strategy to comprehensively address the healthcare requirements of their patients. 

Specialised departments at the hospital are supported by highly skilled and experienced doctors, as well as a dedicated team of healthcare professionals who are experts in their respective fields. The hospital's specialities span a broad spectrum, encompassing fields such as bariatric surgery, cardiac surgery, cardiology, dermatology, gastroenterology, nephrology, neurology, neurosurgery, gynaecology, urology, and more, providing comprehensive healthcare solutions. 

Jupiter Hospital has achieved a significant milestone by joining the ranks of a select group of medical facilities offering computer-assisted neuro rehab centres and knee replacements performed through robotic surgery. Furthermore, the hospital is presently in the stages of constructing a multi-speciality healthcare facility in Dombivli, Maharashtra. This facility has been designed to accommodate more than 500 beds. 

Financials

Outlook and Valuation 

The COVID-19 pandemic highlighted the critical need for fundamental medical facilities throughout the country, subsequently elevating the significance of the industry. The healthcare industry is currently experiencing and is poised to continue undergoing substantial growth and transformation in the years ahead. Jupiter Life Line Hospitals is gaining prominence due to its position as one of the leading providers of cutting-edge and advanced healthcare services, complemented by state-of-the-art diagnostic capabilities. 

If we calculate the PE ratio by attributing FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, the resulting PE ratio stands at 66.10. To provide a comparative perspective, the offer document highlights Apollo Hospitals, Krishna Institute of Medical Sciences, Narayana Hrudayalaya, Fortis Healthcare, and Max Healthcare as their listed peers. It's important to note that while these companies are trading at PE ratios of 107, 47, 30, 43, and 49, respectively, they may not be directly comparable on a strictly like-for-like basis given variations in their business models, operations, and market dynamics. 

The issue is priced with a P/BV ratio of 11.41, calculated using its Net Asset Value (NAV) of Rs 64.39 as of March 31, 2023. At the upper price cap, it is priced at a P/BV ratio of 4.68, considering its post-IPO NAV of Rs 156.93 per share. 

When considering the company's growth prospects, it's noteworthy that the company is actively expanding its presence in the Western regions as part of its strategic expansion efforts. It has reported impressive growth in both its revenue and net profit over the past few years. It boasts a robust RoE and RoCE of 20 per cent, underscoring its impressive profitability. 

After the IPO, the company will transition into a debt-free entity, which will result in increased cash generation and savings in finance costs. Hence, we recommend investors to subscribe the issue with a long-term perspective.