Avoid Goodwill Hospital & Research IPO: MLR Securities

MLR Securities has come out with its report on Goodwill Hospital & Research Centre IPO. The research firm has recommended investors to avoid the issue because of its aggressive pricing and high leverage.

The company is asking for a valuation of 15 times FY11 EPS on an upper price band of Rs 185 and a P/BV of 2.4 times. Its peers like Fortis Malar Hospitals and Noida Medicare are trading at 9.4 and 5 times their trailing earnings respectively. Also, the EV/Bed of the company is quite high at 1.45 times compared to Fortis Malar Hospitals and Noida Medicare which are trading at an EV/Bed of 0.33 and 0.25 times respectively. We recommend investors to avoid the issue because of its aggressive pricing and high leverage.

Company Background

GHRC runs a hospital at Noida called Ojjus Medicare with focus on areas such as neurology and neuro surgery, cardiology and cardiac surgery and orthopaedics. It has a 220-bed hospital, which is equipped with surgical ICU, medical ICU, four operation theatres and imaging facility. The company plans to set up a diagnostic centre at Faridabad under a wholly-owned subsidiary, Ojjus Fidelity Healthcare. Besides this, the company also intends to set up six polyclinics for treating neurocardiac, orthapaedics and minimal invasive surgery within the radius of 150 km from Noida.

The operations of the hospital are supported through a team of doctors and other medical staff. As on August 31st, 2011 the company had a team of 32 full time doctors supported by 72 nurses and 46 other medical personnel. The hospital's specialty is Gamma Knife Machine which is used for non invasive treatment of brain tumors, vascular malformations and functional diseases like Parkinson's disease, trigeminal neuralgia and psychiatric disorders using precise focused gamma rays.

Goodwill Hospital and Research Centre is a wholly owned subsidiary of Ojjus Medicare Pvt ltd which is promoted by Mr. Harvansh Chawla. He has business interests in the areas of consulting, real estate, healthcare etc through his various group companies/entities.

Objects of the Issue
• Establishment of Polyclinics - Rs 34 Cr
• Setting up of Diagnostic Centre at Faridabad - Rs 16 Cr
• Repayment/Prepayment of loans - Rs 10 Cr

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To read the full report click on the attachment