IPO Analysis: Krishna Institute of Medical Sciences

IPO rating- Invest for listing gains 

About the issue

Krishna Institute of Medical Sciences (KIMS) is one of the largest healthcare groups in Andhra Pradesh and Telangana. It is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 each. The public issue comprises a fresh issue of equity shares worth Rs 200 crore and offer-for-sale (OFS) of up to Rs 1,943.74 crore. The price band of the issue has been fixed at Rs 815 to Rs 825 per equity share. The IPO open date is June 16, 2021, while it will close on June 18, 2021. The issue will be listed on June 28, 2021. The IPO market lot size is 18 shares. A retail-individual investor can apply for up to 13 lots (234 shares or Rs 1,93,050). The quota for retail investors in KIMS’ IPO has been fixed at 10 per cent of the net offer. The QIB and NII quota has been fixed at 75 per cent and 15 per cent, respectively. The objective of the offer is to make repayment of the company and its subsidiary debt fully or partially as well as to meet other general corporate purposes. 

About the company 

KIMS Ltd is one of the largest healthcare groups in Andhra Pradesh and Telangana. It provides multi-disciplinary healthcare services in primary, secondary & tertiary care in tier 2-3 cities. The company offers a full range of healthcare services including oncology, cardiac sciences, neurosciences, gastric sciences, orthopaedics, renal sciences, organ transplantation as well as mother & childcare. It operates through nine multi-speciality hospitals under the brand name of KIMS Hospitals with an aggregate bed capacity of 3,064 including over 2,500 operational beds. 

Competitive strengths 

One of the largest corporate healthcare service providers in Andhra Pradesh & Telangana. 

Highly qualified & trained doctors as well as medical support staff. 

Strong operational and financial performance. 

Experienced managerial team.  

Financials 

In FY21, the company had average revenue per operating bed (ARPOB) of Rs 20,609, a bed occupancy rate of 78.60 per cent, and an average length of stay of 5.53 days. The ARPOB at tier 1 cities stood at Rs 39,571 while it was Rs 11,187 in tier 2-3 cities. In FY21, 17.82 per cent of KIMS' revenue came from cardiac sciences, 12.55 per cent from neurosciences, 9.30 per cent from renal sciences, and 4.64 per cent from orthopaedics. Revenue from its top two hospitals in Secunderabad & Kondapur (both in Telangana) accounts for 64.09 per cent of the total business in the fiscal year 2021. The company reported a consolidated income of Rs 1,330 crore and a net profit of Rs 205 crore in FY21. 

Valuation & recommendation  

The company plans to expand markets adjacent to its existing core markets, including Chennai and Bengaluru. Apart from Tamil Nadu and Karnataka, it is also exploring its prospects of entering into some parts of central India as well as in Bhubaneswar (Odisha). The company is also giving emphasis on consolidating the existing markets by way of expanding clinical capabilities in the existing hospitals along with adding more bed capacity to meet the growing demand. The company has in recent years expanded its hospital network through the acquisitions of hospitals in Ongole in FY17, Vizag & Anantapur in FY19 and Kurnool in FY20 (all in Andhra Pradesh). The three-year compounded annual growth rate (CAGR) of KIMS is the best amongst the major hospital players. The company is taking initiatives to improve the existing operational efficiencies. It is also investing in digital healthcare and technology. Major qualitative factors, which drive the growth of the company comprise the track record of strong operational & financial performance, disciplined approach to acquisitions resulting in successful inorganic growth as well as the ability to attract, train & retain high-quality doctors, consultants, and medical support staff. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence, you can invest for a listing gain.