Leading multi-specialty paediatric and gynaecology hospital chain operator Rainbow Children's Medicare shares listed on May 10 at Rs 506, a 6.6% discount over the issue price.
The stock opened at Rs 506, against issue price of Rs 542 on the BSE, while the listing price on the NSE was Rs 510.
The muted listing was on expected lines given its IPO had a tepid response from non-institutional buyers and retail investors, though qualified institutional buyers support was quite strong. The public issue was subscribed 12.43 times during April 27-29.
The maiden public issue fetched the company Rs 1,581 crore, of which Rs 280 crore will be utilised for debt redemption and setting up of new hospitals. The rest Rs 1,300.8 crore funds will go to selling shareholders.
British International Investment Plc-backed company operates a multi-specialty paediatric and obstetrics and gynaecology hospital chain in India, with 14 hospitals and three clinics in six cities. It has a total bed capacity of 1,500 beds, with 641 full-time doctors and 1,947 part-time/visiting doctors as of December 2021.
Going forward, the company may seek to expand the hospital network through acquisition of brownfield assets or development of greenfield assets.
Most of analysts had advised subscribing Rainbow public issue with a long term perspective instead of listing gains, citing reasonable valuations compared to peers and resilient operating performance.
"Though the company faces high competition, considering the increasing health and insurance coverage and that the overall paediatric, obstetrics, and gynaecology healthcare segment is expected to witness healthy growth, the long-term prospects of the company are appealing," Yesha Shah, Head of Equity Research at Samco Securities said.
She further said its price-to-earnings (P/E) based on annualised FY22 earnings is at about 31x as compared to industry average of about 53x. "One aspect that investors should be mindful of is that the additional capex planned can depress the operating margins in the short to mid-term. Taking into account these factors, we recommend investors to ‘subscribe for long term’."
Santosh Meena, Head of Research at Swastika Investmart also said the specialized nature of the business, experienced management team, proven ability to attract, train and retain high-calibre medical professionals, under penetration of hospitals in India, make this issue good for long-term investors.
The profitability for 9 months ended December 2021 increased substantially to Rs 126.41 crore from Rs 38.53 crore in the same period of last fiscal. There might be a possibility that this sudden spurt in profitability was due to Covid second wave hospitalizations in Q1 FY21-22. Thus Santosh Meena believes that this exponential rise in profit might not continue in the future.
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