Shares of Max Healthcare Institute gained 1.5 percent in the opening trade on December 11 as investors cheered the company's foray into the Lucknow region through the acquisition of Sahara Hospital in a Rs 940-crore deal.
“We are excited about this acquisition, which is in line with our strategy to enter new Tier I / II cities which have a developed healthcare services ecosystem. Given our track record of successful post-merger integration, we expect to quickly improve the operating and financial performance on the strength of medical excellence of our clinicians and continued patronage from our patients," said Abhay Soi, chairman and managing director of Max Healthcare Institute.
At 9.33am, shares of Max Health were trading 0.5 percent higher at Rs 681.25 on the NSE.
The 550-bed Sahara Hospital in Lucknow is housed in a 17-storey building with a built-up area of 8.9 lakh sq ft and offers multi-disciplinary care in various specialties like gastroenterology, neurology, surgery, cardiology, pulmonology and diagnostic facilities. It also has a nursing college on the same premises with an annual intake of over 100 students.
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Through the acquisition, the company will also make an entry into the growing Lucknow region, following the footsteps of industry peers Global Health and Apollo Hospitals. Brokerages also remain positive on the acquisition and see it as a step in the right direction for Max Health.
"This acquisition should help Max Health gain a foothold in Lucknow and surrounding districts, and give ample land availability to expand at a single location. Further, the scope of growth and profitability improvements makes the acquisition attractive," Motilal Oswal Financial Services stated in a note.
Bullish on the emergence of Lucknow as a healthcare hub in Uttar Pradesh with strong demand from catchment areas like Kanpur, Allahabad, Gorakhpur and Varanasi, Jefferies estimated an average revenue per occupied bed (ARPOB) of Rs 60,000 and an EBITDA margin of over 30 percent for the newly occupied hospital.
Kotak Institutional Equities also believes that the acquisition increases Max Health's ability to drive higher throughput with case mix improvement and further the scope for bed expansion and fair valuations given the attractive Lucknow market.
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