Another player in the IPO basket of June is going to debut on June 16 and that too of a hospital chain in times when Indian households are gathering finance in case if they require to fight against third wave of Covid-19. So far, 17 IPOs have been floated in the primary market in addition with Power Grid Infrastructure Investment Trust and Brookfield REIT this year. This is going to be the 4th IPO which will be floated in June after Shyam Metalics, Blackstone-based Sona Comstar and Dodla Dairy. These four IPOs will garner an amount of Rs. 9,122.92 crores from the Indian market participants.
KIMS Hospitals IPO Details:
- Issuer Company: Krishna Institute of Medical Sciences Ltd.
- Industry: Hospital Chain
- IPO Size: 2,144 cr.
- Price Band: 815-825
- Issue Open Date: 16 June, 21
- Issue Close Date: 18 June, 21
- Listing Date: 28 June, 21
- Minimum Lot Size: 18 shares
- Face Value: 10 Rs. Per share
- Employee Discount: Rs. 40/ share
- Retail Allocation: 10%
- Listing Exchange: NSE, BSE
Composition of Issue Size
The issue size of 2,143.7 crores is a mix of fresh issue of Rs. 200 crores and offer for sale of Rs. 1,943.7 crore at the upper price band.
- Offer For Sale comprises sale of up to 1.60 crore shares by General Atlantic Singapore KH Pte Ltd, up to 3.87 lakh shares by Dr, Bhaskara Rao Bollineni, up to 7.75 lakh shares by Rajyasri Bollineni, up to 3.87 lakh shares by Bollineni Ramanaiah Memorial Hospitals Private Ltd..
- According to Draft Red Herring Prospectus, the issue comprises of Rs. 200 crores from issuance of fresh equity will be utilized for repayment of company debt amounting at Rs. 150 crores while the rest will be utilized for general corporate purpose.
About the Company
Krishna Institute of Medical Sciences (KIMS) Hospitals are one of the largest corporate healthcare groups in AP and Telangana in terms of number of patients treated and treatments offered, according to the CRISIL Report. The hospital chain major provides multi-disciplinary integrated healthcare services, with a focus on primary secondary & tertiary care in Tier 2-3 cities and primary, secondary, tertiary and quaternary healthcare in Tier 1 cities. The company operates 9 multi-speciality hospitals under the “KIMS Hospitals” brand, with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of December 31, 2020, which is 2.2 times more beds than the second largest provider in AP and Telangana, according to the CRISIL report. They offers a comprehensive range of healthcare services across over 25 specialties and super specialties, including cardiac sciences, oncology, neurosciences, gastric sciences, orthopaedics, organ transplantation, renal sciences and mother & child care.
Industry Growth Drivers
- The destiny of a human being that he is prone to get diseased is solely responsible for the growth of hospital and medical sciences in the world.
- Rising trend in the Indian population, eating disorder and filthy atmosphere will continuously push the demand for hospitals in Indian economy.
- The hospital chain industry growth tends to remain higher due to rising urbanization culture. As people are shifting from rural to urban areas and their income is increasing, a shift in visits from government –aided medical facilities to private healthcares chains is observed.
- Indian economy lags in total healthcare expenditure% to GDP in comparison with various countries. Moreover, rising pandemic of Covid-19 has synergized the demand of expenditure towards healthcare facilities.
- Out of total healthcare expenditure in India, 73% is done in private healthcare centers.
- With renewed impetus from the PMJAY, the healthcare delivery market is expected to log a CAGR of 17-18% and reach ₹ 7.07 trillion in fiscal 2024.
Healthcare sector is flooded with listed and unlisted peers in India. In Indian equity markets, hospital chain stocks have performed strongly than any other. Despite being highly-leveraged, the sector is richly valued by the investors. In the listed space: Apollo Hospitals, Narayana Hrundalaya, Fortis Healthcare and Max Healthcare out of which Apollo Hospitals have most healthcare centers. The healthcare is industry is trading at a P/E multiple around 100x. One can take cues from the success of listed healthcare peers for the journey of KIMS Hospitals.
On the financial front, KIMS Hospitals has been able to generate their revenue with the Compounded Annual Growth rate (CAGR) of more than 20% much higher than its listed peers.. The healthcare chain has been able to generate an operating margin of 28.43%. The company is continuously reducing its dependence upon long term borrowing as it has pay-off their borrowing by Rs. 80 crores in FY21. Moreover, the net proceeds from the fresh issue are expected to make it an almost debt-free entity. The company is one of the three hospitals in India rated ‘AA’ by CRISIL that increases their worthiness. Despite paying their long term borrowing, the company has been able to generate incremental cash flows. Considering the upper price band and FY20 Earning Per Share (EPS), the company is demanding a P/E multiple of 30.7x, much lower than the listed peers.