New IPO at Rs 30 per share: Should you subscribe amid market uncertainties?

In this analysis, we take a closer look at Sagility India Ltd and present you with the exclusive IPO details.

About the issue  

Sagility India Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.

Objects of the Issue  

Considering that the issue is exclusively an offer for sale, it is crucial to note that the company will not profit from the offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed in accordance with the number of offered shares they sell as part of the offer.

Promoter holding  

Sagility B.V. and Sagility Holdings B.V. are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 100 per cent in the company.

Company profile

The company offers technology-driven business solutions and services tailored to clients within the U.S. healthcare sector. As a pure-play, healthcare-focused service provider, its client base includes both ‘Payers’ - U.S. health insurance companies responsible for financing and reimbursing healthcare costs and ‘Providers’ - such as hospitals, physicians, and companies in diagnostics and medical devices.

For Payers, the company supports various operational functions, including (i) core benefits administration tasks like claims management, enrolment, benefit plan creation, premium billing, credentialing, and provider data management, and (ii) clinical functions like utilization management, care management, and population health management. Its services for Providers span revenue cycle management, encompassing financial clearance, medical coding, billing, and accounts receivable follow-up.

The company delivers these services through a skilled workforce distributed across five global service delivery centres located in India, the Philippines, the U.S., Jamaica, and Colombia. In FY24, it assisted Payer clients in processing 105 million claims and managing over 75 million interactions with Members and Providers.

Financials 

The company experienced a sudden strong topline and bottom-line growth in FY23 compared to FY22 and continued to show decent growth thereafter. Around 80 per cent of the company’s revenue is generated from its five largest client groups. Despite achieving similar revenue figures on an annualized basis for FY25, its profit was notably lower, primarily due to decreased operating margins and substantial tax expense. As of June 30, 2024, the company reported total borrowings amounting to Rs 944 crore. Since the issue is structured as an offer for sale, the company will not receive any proceeds for loan repayment or future expansion initiatives.

Valuation & Outlook
The company stated that, due to its exclusive focus on the healthcare sector, serving both payer and provider markets, there are no listed service providers in India or globally that directly compare in terms of size and business model.

The issue is priced with a P/BV ratio of 1.85 times, calculated using its Net Asset Value (NAV) of Rs 16.25 as of June 30, 2024.

Based on the company’s annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (PE) ratio is 150. Even when evaluated using FY24 earnings, the PE ratio stands at 57, highlighting that the stock is still a costly investment option.

As of June 30, 2024, the company reported a return on net worth of just 0.29 per cent. Given the low returns and current weak market conditions, we recommend that investors avoid this costly investment.