IPO Analysis: Yatharth Hospital and Trauma Care Services Ltd

IPO Rating: Apply for long term

About the issue:

Incorporated in 2008, Yatharth Hospital and Trauma Care Services Ltd is a multi-care hospital chain. The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 10 per equity share. The price band of the issue has been fixed at Rs 285 to Rs 300 per equity share. The issue size is Rs 686.55 crore at a higher price band.

The IPO opening date is July 26, 2023, and it will be closing on July 28, 2023. The issue is likely to be listed on the exchange on August 07, 2023. The IPO market lot size is 50 Shares and in multiple thereof. A retail-individual investor can apply up to a maximum of 13 lots (650 shares or Rs 195,000) at the upper price band.

Objects of the Issue

The company proposes to utilize the Net Proceeds towards funding the following objects:

1. Repayment/ prepayment, in full or part, of certain borrowings availed by the company.
2. Repayment/ prepayment, in full or part, of certain borrowings availed by the Subsidiaries, namely, AKS Medical & Research Centre Private Limited and Ramraja Multispeciality Hospital & Trauma Centre Private Limited.
3. Funding capital expenditure expenses of the Company for two hospitals, namely, Noida Hospital and Greater Noida Hospital.
4. Funding capital expenditure expenses of the Subsidiaries, AKS and Ramraja, for respective hospitals operated by them.
5. Funding inorganic growth initiatives through acquisitions and other strategic initiatives.
6. General corporate purposes.

Promoter holding

The pre-issue shareholding is 91.34 per cent, post the IPO the promoter stake will be 66.33 per cent.

About the company:

Yatharth Hospital & Trauma Care Services Ltd (YHTCSL) is a private hospital network based in the north. It began with its first hospital in Greater Noida in November 2010 and has been rapidly expanding since then. It had four operational hospitals in the northern areas with 1405 beds as of the filing of this offer document. As of March 31, 2023, it had 609 doctors on its panel for patient care.

Its hospitals in Greater Noida, Noida, and Noida Extension were among the largest in the region. The overall average bed utilisation has been around 50% for all of these hospitals, with Greater Noida (which opened in 2010) having approximately 87% occupancy and Jhansi-Orchha (which opened in 2022) having approximately 9% bed occupancy.

YHTCSL has agreements with a number of third-party health insurance administrators, non-life insurance firms, ESIC (Employees State Insurance Corp.), CGHS (Central Government Health Schemes), and other public and private sector organisations. YHTCSL's Noida Extension and Greater Noida hospitals are the eighth and tenth largest private hospitals in India, respectively, and are focusing heavily on establishing new specialties in healthcare services in order to remain competitive.

Post the pandemic, as health awareness and insurance coverage have increased, preference for a good healthcare service provider has been on the rise and such trends are likely to continue in coming years. As of March 31, 2023, it had 3303 individuals engaged with the company including 178 resident medical officers, 267 consulting doctors besides 164 visiting doctors.

Financial

On the financial performance front, for the last three fiscals, YHTCSL has (on a consolidated basis) posted a revenue/net profit of Rs 229.19 crore /Rs 19.59crore (FY21), Rs 402.59 crore/Rs 44.16 crore (FY22), and Rs 523.1 crore/Rs 65.77crore (FY23).

Valuation and Outlook

Based on FY23 earnings and post-IPO fully diluted paid-up capital, then the asking price is at a P/E of around 39.16x. The issue is priced at a P/BV of 10.74 based on its NAV of Rs. 27.93 as of March 31, 2023, and at a P/BV of 3.25 based on its post-IPO NAV of Rs. 92.37 per share (at upper cap).

According to the offer document, the company has shown Apollo Hospitals, Fortis Healthcare, Narayana Hrudayalaya, Max Healthcare, Krishna Institute of Medical and Global Health as its listed peers. They are currently trading at a P/E of 90.80x, 48.6x, 35.9x, 53.41x, 48.27x, and 58.91x, respectively. If we compared to the listed peers in the industry, the issue appears fully priced.

The company has not declared/paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.

The company has a 1405-bed capacity four hospitals chain in the northern region and is one of the leading healthcare service providers. Looking at valuation and financials we recommend to subscribe the issue for the long term as there might be limited listing gains.