Moneycontrol Bureau Bangalore-based HealthCare Global Enterprises initial public offering (IPO) has opened for subscription Wednesday. The issue which will close on March 18, priced at Rs 205-218 per share is planning to raise Rs 611 crore to Rs 650 crore. This is fourth healthcare IPO from December and Dr Lals, Alkem and Narayana Healthcare have received overwhelming response at debut.Should an investor be interested? Most analysts are bullish on the IPO given its focussed business model. ICICIdirect.com recommends that investors to subscribe as it is a sustainable business model with good visibility. It says that due to limited access to cancer care in India and inability of significant sections of the population to pay for quality care, only around 15-20 percent of cancer patients are currently able to undergo radiation treatment in India, as compared to a potential clinical need of 40-50 percent. of cancer patients. So, HCG can find oppurtunity in this imbalance.
Aditya Birla also suggests to subscribe the IPO for long term investors as HCG is on the course of aggressive expansion, benefits of which can be seen in the medium to long term period. "Given the vast demand-supply mismatch among the institutional investors considering the limited investment options available in the healthcare space, HCG may catch the fancy of investors on the listing day," it says in a report. It is also impressed on HCG proven management background, niche segment of operations, strong expansion plans and opportunities present in the healthcare industry in India.SPA Financial Advisors suggests subscribing the issue. "At the issue price band of Rs 218, the stock is available at EV/EBIDTA of 23.8x based on FY16 annualised earnings. Its nearest comparable like Apollo Hospitals and Narayana Hrudayalaya are trading at EV/EBIDTA of 25.7x and 34.2x respectively based on FY16 earnings," SPA says in a report. SPA feels that HCG is likely to grow ahead of industry as it is well placed tocapture increasing opportunities in the industry backed by strong brand recognition, high quality along with affordable pricing, past track record and experiencedmanagement. HCG's expansion, which is on the verge of completion would bring strong growth matrix for the company while recently added new centres would see strong operating leverage.The issue has already raised Rs 292 crore from 11 anchor investors, at higher end of price band of Rs 218 per share. Nearly one third of anchor investment is allotted to IFC (Rs 95 cr), while rest were bought by Sabre Partners, Citi, Sundaram MF, HDFC Std Life Insurance, Reliance Life, Chennai 2007.The offer size is 2.98 crore shares which include fresh issue of 1.16 crore shares and offer-for-sale (OFS) of 1.82 crore shares. OFS includes 13 parties selling shares. Promoter BS Ajai Kumar is selling 1.8 lakh shares, and post IPO promoter holding will fall to 23 percent from 28.7 percent.Sale of proceeds from the fresh issue will be used to purchase medical equipment, invest in IT services, software and hardware, repayment of Rs 147 crore debt and general corporate purposes.8 things to know about HealthCare Global#1 The company operates largest private cancer care network with a pan-India presence, consisting of 18 cancer centres across India, including 14 comprehensive cancer centres, three freestanding diagnostic centres and a day care chemotherapy centre. In 2013, the company entered the fertility segment by acquiring 50.1 percent stake in BACC Healthcare, which operates four fertility centres under the Milann brand in Bangalore. HCG also operates two multi-speciality hospitals in Gujarat.#2 During H1FY16 and FY15, HCG registered 18,079 and 37,458 new cancerpatients across its network and delivered radiation therapy to 6,163 and 12,647 patients, respectively. It has also performed 12,253 and 23,988 PET-CT procedures, 25,453 and 48,360 chemotherapy administrations and 4,630 and8,707 surgeries, respectively. Out of the 14 cancer centres under HCG’s network, only four are owned and controlled by HCG while others are on joint venture or profit sharing basis.
#3 HCG plans to expand its operations by setting up 12 cancer Centres in cities including Jaipur, Kanpur, Baroda, New Delhi and Kolkata over next 24 months. It also plans to establish a network of speciality cancer centres in Africa.
#4 HCG’s average occupancy rate per operational bed (AOR) stands at 52 percent as on 30 September, 2015.
#5 Change in government policies that relate to patients covered by government schemes could materially and adversely impact financial condition, cash flows and results of operations of the company.
#6 More than 30 percent of the revenue is derived from single centre at Bengaluru. Any economic or regulatory concern over the Bengaluru centre can lead to severely adverse effect on the operations and results of the company.
#7 Revenues grew at a CAGR of 24.7 percent in FY11-15 to Rs 519.4 crore. Majority of its revenue comes from cancer centres. Fertility centres have contributed 7.8 percent in FY15 total revenue while its multi-specialty hospitals contributed 11.1 percent to FY15 revenue. EBITDA margins contracted 295 basis points to 14.7 percent in FY11-15 mainly due to addition of new cancer centres. Net profit was just Rs 0.5 crore in FY15, mainly due to aggressive expansion and high interest burden. #8 As of 9MFY16, gross debt was Rs 369.8 crore.Follow @NasrinzStory
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