Yatharth Hospital IPO opens, analysts upbeat: Should you bid?

Yatharth Hospital is among the top 10 largest hospitals in Delhi-NCR.

The pharma and healthcare sectors have been on the radar of fund managers for the last few months, evident from the rise in share prices of several stocks in these segments. No wonder, analysts are going gung-ho on the Yatharth Hospital's plans to go public at such a time.

Most analysts tracking the initial public offer (IPO) of the company have advised to subscribe to the issue, citing its strong financial track record, encouraging growth projections, and expansion plans.

“They (Yatharth Hospital) have recently introduced kidney transplantation, bone marrow transplantation and oncology department. These speciality services will add cost to the hospital in the medium to long term, hence margins could see some pressure. Majorly, their revenue comes from government deals (34 percent), which can stretch the debtor days and margins as well. Hence, we recommend subscribing to the issue for listing gains,” said Sankita V, an analyst at Canara Bank Securities. .

Yatharth Hospital is among the top 10 largest hospitals in Delhi-NCR with a bed capacity of 1,405, out of which 394 beds are reserved for critical care. The hospital charges 20 percent cheaper rates than its peers, underlined analysts. The company is planning to expand in and around Uttar Pradesh and Delhi.

At the upper price band of Rs 300, Geojit Financial Services said Yatharth Hospital is available at a P/E of 39.2x (on FY23 EPS), which appears to be reasonably priced compared to its peers. “Considering its consistent topline growth, stable margins, strategic acquisition, revival of medical tourism, and promising industry outlook, we assign a ‘subscribe’ rating on a medium to long term basis,” said the broker in a note.

Apollo Hospitals traded at 91 times its earnings, Fortis Healthcare at 43 times, Narayana Hrudayalaya at 35 times and Max Healthcare 54 times.

The company has fixed a price band of Rs 285-300 per share. It plans to raise a total Rs 676.7 crore at a lower price band and Rs 686.55 crore at an upper price band through the public issue. The issue comprises fresh shares worth Rs 490 crore and an offer-for-sale (OFS) of 65.51 lakh equity shares by promoters Vimla Tyagi, Prem Narayan Tyagi and Neena Tyagi.

Yatharth Hospital said it will use the fresh issue proceeds for repaying debts, capital expenditure for hospitals, and funding inorganic growth initiatives, besides general corporate purposes.

The company put up a stable operating and financial performance and growth over the past three fiscals. Its EBITDA has avarged a growth of 41.29 percent from Rs 67.01 crore in fiscal 2021 to Rs 133.76 million in fiscal 2023, while its net profit increased from Rs 19.58 crore in fiscal 2021 to Rs 44.16 crore in fiscal 2022 and then to Rs 65.76 crore in fiscal 2023.

Yatharth Hospital IPO opens today: 10 things to know before you buy it

Vikas Jain, Senior Research Analyst at Reliance Securities, highlighted that India’s current healthcare expenditure is largely dominated by private expenditure. North Indian regions, including Haryana, Uttar Pradesh and Uttarakhand, have lower than average doctor and nurse density per 10,000 people. This is expected to improve going ahead, favouring the company’s expansion plans.

“Yatharth’s recent acquisition of the Jhansi-Orchha hospital is aimed at further expanding into new geographies and growing their presence in the regional healthcare market,” said Jain. “In view of strong financials, growth potentials in Northern India, debt free company post IPO proceeds, advanced and patient-friendly facilities we give a ‘subscribe’ to the issue.”

Marwadi Financial Services and Asit C Mehta also have ‘subscribe’ rating on the issue.

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