Centrum has come out with its report on Shalby Company IPO , The research firm has recommended to “ Subscribe ” the IPO in its research report as on December 04, 2017.
Shalby Ltd (Shalby) is one of the leading multi-speciality chain of hospitals in India Led by Dr. Vikram Shah, an Orthopaedic Surgeon with more than 25 years of professional experience. It had a 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016. As of 24 Nov’17, Shalby had 11 operational hospitals with a bed capacity of 2,012 beds, 47 outpatient clinics. In terms of vertical mix, Orthopaedics comprises ~64% of total surgeries & non-orthopaedics ~36%.
Recommendation: At the higher end of the price band of ₹248, the issue is priced at 42.8x its FY17 earnings and 41.1x its EV/EBITDA. At this valuation, the issue of Shalby is attractively priced compared to close peer Narayana Hrudayalaya (recent IPO in the sector) trading at 72x P/E and 27.1x EV/EBIDTA. Shalby’s RoE of 26.6% is better compared to peers’ average of 11.8% for FY17 (Refer Exhibit 6). Considering robust growth, high return ratios, strong balance sheet and future prospects, investors can be advised to Subscribe to the issue. There is an underlying assumption that Shalby would maintain healthy growth rates going ahead.
Objects of the issue: The issue consists of an offer for sale (OFS) of 0.9% equity post issue market cap from Promoter at ~₹25 crore and fresh issue of 17.9% - ₹480 crore (refer exhibit 1). The money raised through fresh issue will be used for repayment of debt (~₹300 crore), purchase of medical equipment (~₹64 crore) and purchase of furniture and infrastructure (~₹11 crore).
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