IPO Analysis: GPT Healthcare Ltd

IPO Rating: Apply for the long-term

About the Issue:  

GPT Healthcare Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 10 each. The IPO price range is set between Rs 177 and Rs 186 per equity share, resulting in a total issue size of Rs 525.14 crore at the upper price band.  

The IPO is scheduled to commence on February 22, 2024, and will conclude on February 26, 2024. The market lot size for the IPO is 80 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 1,040 shares or a total investment of Rs 1,93,440 assuming the upper price band.   

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company and for general corporate purposes.

Promoter holding  

GPT Sons Private Limited, Dwarika Prasad Tantia, Dr Om Tantia, and Shree Gopal Tantia are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 67.34 per cent in the company.   

Company profile  

The company stands as a leading corporate healthcare entity in Eastern India, operating a network of mid-sized full-service hospitals branded as ILS Hospitals. Its offerings encompass integrated healthcare services, emphasizing secondary and tertiary care. As of September 30, 2023, the company operates four multispecialty hospitals located in Dum Dum, Salt Lake, and Howrah in West Bengal, as well as in Agartala, Tripura, boasting a combined capacity of 561 beds.

It offers an extensive array of healthcare services spanning over 35 specialities and super specialities, including internal medicine and diabetology, nephrology, gynaecology, critical care, gastroenterology, orthopaedics and joint replacements, interventional cardiology, neurology, neurosurgery, paediatrics, and neonatology. Additionally, each hospital provides integrated diagnostic services and pharmacies to cater to the needs of patients.

Financials  

The company has effectively enhanced its top-line growth over recent years. Additionally, net profits have shown robust growth, albeit experiencing a slight decline in FY23 following an impressive year-on-year growth of approximately 100 per cent in FY22. The figures for the first half of FY24 were similarly positive, suggesting continued strong growth for the full fiscal year of FY24. The company boasts a return on equity (RoE) and return on capital employed (RoCE) of 24 per cent and 26 per cent, respectively, for the fiscal year 2023.

Valuation and outlook 

The issue is priced with a P/BV ratio of 8.67 times, calculated using its Net Asset Value (NAV) of Rs 21.45 as of September 30, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 32. GPT Healthcare Ltd demonstrates superior performance compared to its listed peers in terms of both valuation and returns.

India also enjoys advantages in medical tourism, drawing patients from neighbouring countries like Bangladesh, Nepal, and Bhutan who seek high-quality healthcare services. Eastern India, in particular, holds a strategic advantage in medical tourism due to its comparatively lower average treatment costs compared to the northern and western regions of the country. Additionally, Eastern India is more accessible to these neighbouring countries, further enhancing its appeal as a destination for medical value travel.

With the concentration of hospitals in Eastern India, the company is strategically positioned to capitalize on the anticipated growth in the healthcare sector within this region and neighbouring states. This advantageous position stems from the company’s early-mover advantage, strategically situated hospitals, and strong brand presence. Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.