Broking firms are largely optimistic about upcoming initial public offering (IPO) of Shalby Hospitals citing good valuations and interesting long-term bet.
The Ahmedabad-based multi-speciality hospital chain fixed the price band between Rs 245 and Rs 248 per equity share for its proposed initial public offer (IPO) to raise about Rs 504 crore.
The offer comprises a fresh issue of equity shares aggregating up to Rs 480 crore and an offer for sale of up to 10,00,000 equity shares.
Proceeds of the IPO will be utilised towards repayment of borrowings availed by the company besides purchasing medical equipment for existing, recently set-up as well as upcoming hospitals, the company said. The offer will open on December 5 and close on December 7.
"We aim to be one of the leading healthcare service providers in India by expanding the network of hospitals owned and operated through greenfield and brownfield projects, strategic acquisitions and operation and management (O&M) arrangements," Shalby chairman and managing Vikram Shah told reporters.
In the recent months, healthcare services firms Alkem Laboratories, Dr Lal Pathlabs, Narayana Hrudayalaya, Thyrocare and Eris Lifesciences have tapped the primary market through IPO route.
Also read: Shalby IPO to open on December 5; 10 things you should know before investing
Here’s what brokerages are discussing about the issue.
HEM Securities | Subscribe
The brokerage house highlighted that the firm has nine operational hospitals with an aggregate operational bed count of 841 beds. It has 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016
On its network, the brokerage said that the firm has a domestic and overseas outreach through a network of hospitals in India, and Outpatient Clinics and SACE located in India, Africa, and the Middle East.
On the valuation front, it said that at price band of Rs 245-248 /share at p/e multiple of 46-47. The firm has leadership in orthopedics with integrated and scalable business model enhancing patient reach and is experienced player with longstanding presence
SMC Research | Subscribe
SMC Research said that the company intends to strengthen its hospital presence in western and central India and continue expanding into new geographies, implement initiatives to improve operational efficiencies and continue to grow ancillary businesses.
“At present, the Company is dependent on one field of specialty for a substantial portion of its revenue, i.e. orthopaedics. In order to reining the higher medical cost, the government has recently capped the cost of Knee replacement and heart surgery, which could be risky for the health care industry as the move has the potential to limit the margins,” the brokerage said in a report.
Choice Broking | Subscribe
In terms of valuations, Choice Broking highlighted that at Rs 248, the share is available at a P/E multiple of 42.8(x) which is at a discount to its peer’s P/E (Apollo Hospitals – 67.7x, Narayana Hrudayalaya – 90x and Healthcare Global – 118.4x).
“The company intends to strengthen its presence in central and western India and planned to establish new hospitals in new geographies. Its assets light approach with the establishment of outpatient Clinics and SACE provide the opportunity to carry out preliminary assessments on markets prior to setting up a full-fledged hospital which is high capital intensive thereby reducing the risk of business failure,” the brokerage said in a report.
Further, it said that the company is a fundamentally strong and well-managed company and at P/E (x) of 42.8 (considered post issue EPS), the issue is available at attractive valuation.
ICICI Securities | Unrated
The brokerage house highlighted that at the upper band of Rs 248, the stock is available at 41.3x FY17 EV/EBITDA of Rs 72.4. The company has a strong brand equity in Gujarat and other emerging areas and has a seen significant growth in inpatient and outpatient volumes across its hospital network.
Orthopaedic speciality continues to dominate its revenue pie although it is also witnessing greater traction in other specialities. However, in the backdrop of steeper valuation and growing government intervention, we assign an UNRATED recommendation on Shalby.