Medi Assist Healthcare Services IPO | 10 key things to know before buying the Rs 1,172-crore public issue

Medi Assist Healthcare Services IPO set to open on January 15

Medi Assist Healthcare Services’s initial public offering is set to be the second IPO in the mainboard segment in the current month, after Jyoti CNC Automation.

This will be the first entity in the third-party administration (TPA) services (to insurance companies) sector, to go public.

Here are 10 key things to know before subscribing to the offer:

1) IPO Dates

The maiden public issue will be opened for subscription during January 15-17, while the anchor book portion of the offer will be launched for a day on January 12.

2) Price Band

The Medi Assist IPO price band has been fixed at Rs 397-418 per equity share.

3) Offer Size

The Bengaluru-based company is planning to raise Rs 1,112.7 crore at the lower price band and Rs 1,171.6 crore at the upper price band, through the public issue of 2,80,28,168 equity shares. It is entirely an offer-for-sale (OFS) issue by the existing shareholders and there is no fresh issue component.

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Among promoters, Dr Vikram Jit Singh Chhatwal will be selling 25,39,092 equity shares, Medimatter Health Management 1,24,68,592 equity shares (including 5,37,080 equity shares held jointly with Vikram Jit Singh Chhatwal), and Bessemer Health Capital LLC 66,06,084 equity shares in the OFS, while investor Investcorp Private Equity Fund I will be offloading 62,75,706 shares.

The remaining 1,38,694 equity shares will be sold by the other 9 shareholders.

Further, Vikram Jit Singh Chhatwal and Bessemer Health Capital LLC will exit the company by selling their entire personal shareholding.

4) Objectives of the Issue

The main objectives of Medi Assist IPO are to complete the OFS and to achieve the benefits of listing the equity shares on the bourses, as the company expects the move to enhance visibility and brand.
Meanwhile, the company will not receive any proceeds from the offer. All proceeds from the offer will go to the selling shareholders.

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5) Lot Size

Investors can bid for a minimum of 35 equity shares in the Medi Assist Healthcare Services IPO and in multiples of 35 shares thereafter. Hence, the minimum application size for retail investors will be Rs 14,630 (for 35 shares) and the maximum investment by them will be Rs 1,90,190 (for 455 shares) as they can invest up to Rs 2 lakh in the IPO.

Half of the entire offer size (i.e. 1,40,14,084 equity shares) has been reserved for qualified institutional investors. Further, 15 percent shares of the IPO are reserved for non-institutional investors (high networth individuals), and the remaining 35 percent for retail investors.

6) Company Profile

Medi Assist Healthcare Services provides TPA services to insurance companies through its three wholly owned subsidiaries, Medi Assist TPA, Medvantage TPA (which was acquired from February 13, 2023) and Raksha TPA (from August 25, 2023).

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As a TPA, Medi Assist acts as a facilitator between insurance companies and their policyholders, insurance companies and healthcare providers (such as hospitals), and the government and beneficiaries of public health schemes.

Medi Assist TPA had a market share of 14.83 percent of the retail health insurance market and 41.71 percent of the group health insurance market. It managed Rs 14,574.65 crore of health insurance premiums (group and retail) as of FY23, which grew at a CAGR of 35.67 percent from Rs 7,918.5 crore as of FY21.

By September FY24, it worked with 35 insurance companies in India and globally. It has a pan-India healthcare provider network comprising 18,754 hospitals across 1,069 cities and towns and 31 states (including Union territories) in India.

With a longstanding base of group accounts, Medi Assist serviced 78 percent of the Nifty 50 companies and 35 percent of the BSE 500 companies, as of September 2023.

Medi Assist Healthcare Services, being a holding company, operates its entire business through nine subsidiaries, of which four are direct subsidiaries and five are indirect subsidiaries.

It also provides other healthcare and ancillary services such as hospitalisation, call centre, customer relations and contract management, billing and claims processing through other subsidiaries IHMS, Mayfair India, Mayfair UK, Mayfair Group Holding, Mayfair Philippines and Mayfair Singapore.

7) Financials

Medi Assist has registered an 18.7 percent on-year growth in consolidated net profit at Rs 75.31 crore on strong topline and operating margin performance for the year ended March FY23.

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Revenue from operations during the same period grew by 28.2 percent to Rs 504.9 crore, while EBITDA (earnings before interest, tax, depreciation and amortisation) increased by 30.8 percent to Rs 119.35 crore with margin expansion of 40 bps at 23.6 percent for the year.

However, the net profit for the six months ended September FY24 fell 34 percent year on year to Rs 24.3 crore impacted by dismal margin performance and higher other expenses, but the topline remained strong with revenue at Rs 302 crore growing 24 percent over a year-ago period. EBITDA in the same period rose by 7.6 percent to Rs 62.4 crore and the margin dropped 315 bps to 20.66 percent compared to the corresponding period of the last financial year.

Subsidiaries Medi Assist TPA, Medvantage TPA and Raksha TPA contributed 92.98 percent to the company's revenue from contracts with customers in the first half of FY24.

8) Promoters

Promoters Vikram Jit Singh Chhatwal, Medimatter Health and Bessemer India Capital Holdings II hold 67.55 percent shareholding in Medi Assist, while the total promoter shareholding is 77.14 percent. Medimatter Health, which has a 27.33 percent stake in Medi Assist, is owned by Vikram Jit Singh Chhatwal and his wife Savitri Choudhury.

Bessemer India Capital Holdings II is the largest shareholder in the company with 35.13 percent shares (pre-offer), while the public shareholding in the company is 22.86 percent including Investcorp Private Equity Fund I with 21.18 percent shares.

Vikram Jit Singh Chhatwal is the Chairman and Whole-time Director, while Satish V N Gidugu is the Whole-time Director and Chief Executive Officer of the company.

Among others, Mathew George is the Chief Financial Officer, Simmi Singh Bisht is the Chief Compliance Officer and Company Secretary of the company, while Nikhil Chopra and Himanshu Rastogi are the Chief Business Officer and Chief Technology Officer of the firm.

9) Risk Factors

a) Top five clients accounted for 71 percent of revenue in the six months that ended September 2023. The loss of one or more such clients could adversely affect its business and prospects.
b) Income from benefit administration services provided to insurance companies across the group and retail portfolio is largely generated as a percentage of premium under management and any decline in the premium under management may adversely affect its future revenues and profitability.
c) A decrease in insurance companies outsourcing claims processing and other related activities to TPAs could impact the business.
d) The TPA industry is intensely competitive.
e) The financial performance is dependent on timely invoicing and collection of receivables.
f) Changing laws, rules and regulations and legal uncertainties may adversely affect the business.

10) Allotment & Listing Dates, Grey Market Premium

The basis of allotment of IPO shares will be finalised by January 18 and the successful investors will get shares in their demat accounts by January 19.

Medi Assist Healthcare Services IPO shares, which will debut on the bourses on January 22, were available at a 19 percent premium over the upper price band in the grey market, according to the market observers.

The grey market is an unofficial platform for trading in the IPO shares till the listing.

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