IPO Analysis: Global Health Limited

IPO Rating: Invest for long term

About the issue: 

Global Health Limited one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 2 per equity share. The price band of the issue has been fixed at Rs 319 to Rs 336 per equity share. The issue size is Rs 2205.57 crore at a higher price band.   

 The IPO opening date is November 3, 2022, and it will be closing on November 7, 2022. The issue is likely to be listed on the exchange on November 16, 2022. The IPO market lot size is 44 Shares and in multiple thereof. A retail-individual investor can apply up to a maximum of 13 lots (572 shares or Rs 192,192) at the upper price band. 

Objects of the Issue 

The company proposes to utilise the Net Proceeds of the Fresh Issue towards funding the following objects: 

1. Repayment/prepayment of borrowings, in full or part, of the Subsidiaries, GHPPL and MHPL. 

2. General corporate purposes. 

Promoter holding  

The Pre issue share holding is 35 per cent, Post the IPO the promoter stake will be 33 per cent.  

About the company: 

 Global Health Ltd (GHL) is one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India in terms of bed capacity and operating revenues, with key specialities in cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and anaesthesia.  

It has a network of five hospitals operating under the "Medanta" name right now (Gurugram, Indore, Ranchi, Lucknow, and Patna) and one hospital being built (Noida). By June 30, 2022, it employed over 1,300 doctors and offered healthcare services in more than 30 medical specialities. Its operating facilities, which occupy a space of 4.7 million square feet, had 2,467 installed beds.  

The Gurugram hospital of GHL was named the finest private hospital in India for three years in a row, in 2020, 2021, and 2022. It was also the only private hospital in India to appear on Newsweek's lists of the top 200 worldwide hospitals in 2021 and the top 250 global hospitals in 2022. Its Gurugram hospital was recognised as the "Best Multi-Speciality Hospital - National" at the "Economic Times Healthcare Awards 2021" and named the "Best Multispecialty Private Hospital in North India" by "The Week" in 2021.  

It was also included in Newsweek's lists of the world's best-specialized hospitals for cardiology and neurology in 2022 and the list of the world's best-specialized hospitals for cardiology in 2021. In addition, according to "Finest All India Multi Speciality Hospital Ranking 2022" by Outlook and NEB Research, its hospital in Gurugram is the best multi-speciality private hospital in North India and the second-best private hospital in India.  

GHL had 2,141 installed beds as of March 31, 2020, and by June 30, 2022, it had grown by 15.23% to 2,467 installed beds. With the opening of its Noida hospital in fiscal 2025, it anticipates having more than 3,500 installed beds by the end of that year, serving both local and foreign patients as part of GHL's medical tourism business plan. Instead of operating on a greed-based basis, the organisation uses a needs-based approach.  

Financial   

On the subject of the company's financial performance, GHL has (on a consolidated basis) reported turnover/net profits of Rs 1544.27 crore/Rs 36.33 crore. (FY20), Rs. 1478.16 crore/ Rs 28.81 crore (FY21), and Rs 2205.82 crore/Rs 196.20 crore in the course of the last three fiscal years (FY22). During the pandemic that occurred in FY21, it experienced a temporary setback. It had a net profit of Rs 58.71 crore during the first quarter of fiscal year 23 and a turnover of Rs 626.54 crore. 

GHL has recorded (on a consolidated basis) average earnings per share of Rs. 4.51 and an average return on the net worth of 7.21 per cent for the previous three fiscal years.   

*Consolidated basis  

Valuation and Outlook 

For the valuation factor, the company's topline is growing at a 3-year CAGR of 14 per cent, while the bottom line is growing at a 3-year CAGR of 56 per cent. The company's operating margin in FY20 and FY21 was 12.8 per cent and 13.6 per cent, respectively. It experienced a sharp increase of 21 per cent in the FY22. In FY22, the net profit margin also increased significantly, from 2 per cent to 9 per cent. Debt to equity ratio for the company is 0.7 times, which seems to be a respectable ratio. Since CFO for FY22 was Rs 311 crore, the company's cash situation appears to be strong.  

The stock is being sold at a price with a P/E ratio of 38.36 times if we annualize FY23 earnings and credit them to post-issue fully diluted paid-up equity capital. As a result, the issue's pricing is attractively competitive. The pandemic has had an influence over the last two years, which has led to a dramatic fall in the company's profitability margins. However, the financial results for FY22 are strong, and the trend is likely to continue as more facilities with more beds are being added. Due to attractive valuation and strong fundamentals and a global name we recommend investors to invest for long term in this IPO.