Global Health (Medanta) IPO opens this week: Should you subscribe?

Global Health Limited (Medanta) IPO opens for subscription on 3rd November. The company is looking to raise up to Rs 2,205.57 crore through the public issue. Here are the details:  

Global Health Limited IPO Details

• Global Health IPO Date: 3 November - 7 November 2022
• Global Health IPO Price band: Rs 319 - Rs 336 
• Global Health IPO Issue Size: Rs 2,205.57 crore (Fresh Issue of Equity shares aggregating up to Rs 500 crore and offer for sale of 50,761,000 Equity Shares )
• Reservation: QIB 50%, Retail - 35%, NII 15%
• Minimum Investment: Rs 14,784
• Post Issue Implied Market Cap: Rs 8,580 – Rs 9,011 crore
• Bid lot: 44 shares, and in multiples of 44 shares

Global Health Limited IPO: Objects of the Issue

The net proceeds from the IPO will be utilized for the below purposes:

• Repayment or prepayment of borrowings, in full or part, of the subsidiaries - GHPPL and MHPL.
• General corporate purposes.

You can apply for IPO through INDmoney using UPI. Click here to apply.

Global Health Limited IPO: About Global Health

• Medanta is one of the largest private multi-specialty tertiary care providers operating in the North and East regions of India.
• It has key specialties in cardiology and cardiac science, digestive and hepatobiliary sciences, neurosciences, oncology, orthopedics, liver transplant, and kidney and urology.
• Medanta has a network of 5 hospitals currently in operation in Gurugram, Indore, Ranchi, Lucknow, and Patna), while one hospital in Noida is under construction.
• Upon operation of their Noida hospital, the company expects the number of total installed beds to exceed 3,500 at the end of FY25.
• Global Health Limited's hospital at Gurugram was ranked as the best private hospital in India for three consecutive years in 2020, 2021, and 2022.

Global Health Limited IPO: Facilities

• The Medicity, Gurugram: Company’s flagship hospital is located in Gurugram and it was built in 2009. It has an installed bed capacity of 1,391 beds and employed over 800 doctors.
• Medanta Lucknow Hospital: The hospital opened in 2019. It has 12 operating theatres, 93 ICU beds, and 473 installed beds with a capacity to accommodate over 900 beds and employed over 200 doctors.
• Medanta Super Speciality Hospital, Indore: It started operations in 2014. It has 5 operating theatres and 53 ICUs, 175 installed beds, and employed over 50 doctors.
• Medanta Abdur Razzaque Ansari Memorial Weavers’ Hospital, Ranchi: Started in 2015 and has 200 installed beds and employed over 50 doctors across key specialties.
• Jai Prabha Medanta Super Specialty Hospital, Patna: Started in 2020. It has 28 ICU beds, 228 installed beds, and employed over 125 doctors.

Global Health Limited IPO: Industry Outlook

• The healthcare budget has increased year-over-year, with a budget for the Ministry of Health and Family Welfare (MoHFW) clocking an 11% CAGR between FY11 and FY23.
• Public healthcare expenditure is low, with the private sector accounting for a lion’s share.
• CRISIL Research estimates the Indian healthcare delivery industry to post a healthy 13-15% CAGR between FY22 and FY26, driven by long-term structural factors, strong fundamentals, and increasing affordability.

Global Health Limited IPO: Listed peers

The company has many listed peers, the names include Apollo Hospitals Enterprises Ltd, Fortis Healthcare, Max Healthcare Institute, and Narayana Hrudayalaya. The comparison with listed peers is as below:

• For FY22, in terms of total income, Global Health is at the bottom of the list, while Apollo hospitals top the table.
• The net profit is the lowest for Medanta among all the listed peers, while Apollo and Fortis are at the top of the chart.
• However, in terms of EPS (Basic), Medanta is doing better than most peers, only behind Apollo and Narayana Hrudayalaya hospital.
• Global Health Ltd reported the second-highest operating margin of 21.4% amongst listed peers in FY22. Max Healthcare reported the highest operating margin of 26.7% amongst the players.
• The PE of most peers is higher on the higher side with average PE of 51.93. Medanta has quoted lower PE than the average of 43.24 (at the upper price band).
• For Return on Net Worth (RoNW), Medanta reported 12.14% RoNW below Apollo's 58.53% and Max Healthcare's 64.79%.

Global Healthcare Limited IPO: Financials

• The company's revenue from the operation has increased in the last three financial years. For FY20, FY21, and FY22, the revenue reported by the company was Rs 1500.42 crore, Rs 1446.74 crore, and Rs 2166.59 crore, respectively. The revenue has grown at a CAGR of 20.19%.
• EBITDA for FY20, FY21, and FY22 is Rs 230.45 crore, Rs 222.85 crore, and Rs 489.76 crore, respectively. The net profit margin for the same period was 2.42%, 1.99%, and 9.06%, respectively.
• The average EPS and RoNW for the last three financial years is 3.45 and 5.64%, respectively.
• The company has Debt to Equity ratio of 0.50.
• The average occupancy level of beds at hospitals dropped in FY21 to 51.57% compared to 54.85% in FY20. 
• The average number of days that patients spent in the hospital was 3.52 days, 3.89 days, and 3.76 days for FY20, FY21, and FY22.

Global Health Limited IPO: Unique Selling Propositions

Tertiary and quaternary care provider: The company focuses on quality tertiary and quaternary care, treatment of lifestyle diseases, and provision of value-based treatments, and works on a high number of critical, complex cases.

Focus on Clinical Research and Academics: They are focused on clinical research and academics. Medanta established “The Medanta Institutional Tissue Repository” in 2017 to promote biomarker and other tissue-based research. Doctors associated with hospitals have published 451 peer-reviewed indexed journal publications between January 2021 and June 2022.

Large-scale hospitals: The company has a high focus on infection control practices in design and operations at all their hospitals. In each of their greenfield hospitals, care has been taken to ensure patient-centric design choices.

Focus on under-served areas: In line with their mission to deliver advanced healthcare to all expansion beyond their flagship hospital in NCR has focused on under-served areas with dense populations. 

Global Health Limited IPO: Growth Potential

Invest in bed capacity expansion: They will continue to invest in bed capacity expansion in existing facilities and develop further super-specialties, employ new technology and focus on preventive healthcare. 

Continue to train and engage skilled doctors: The company's key to success is high-quality medical professionals. Therefore they will continue to hire surgeons and other physicians who have established a reputation in their respective fields. They will continue to leverage the relationship with schools and medical institutions that they collaborate with for recruitment to source entry-level medical professionals.

Enhance clinical capabilities and improve operating efficiencies: They plan to improve occupancy rates and equipment utilization at their hospitals by continuing to maintain and recruit new medical professionals of high caliber in specified fields and focus on clinical excellence.

Leverage technology to improve patient experience: Medanta will continue to seek to add key technological advancements in healthcare and surgical products at their facilities. It expects this will further enhance its total specialty healthcare services.

Global Health Limited IPO: Risks

Loss-making subsidiaries: The company has two subsidiaries, and both are loss-making. MHPL has incurred losses in FY20 and FY21, and GHPPL has incurred losses in FY20, FY21, and FY22.

Only five hospitals: The company generates all of its revenue from the five hospitals and clinics. Any loss of business or disruption in the operations of these hospitals will have a significant impact on their overall business. 

Dependency on doctors and nurses: Like any other hospital network, the company's performance and growth strategy depend substantially on its ability to attract and retain experienced doctors, nurses, and other healthcare professionals in a highly competitive industry. Skilled doctors are in high demand in India, making it difficult to hire and retain senior doctors. If they are unable to do it, it will impact their business.

Global Health IPO: Detailed review and Recommendation

• Robust rise in revenues: Global Health has seen a robust 20% CAGR rise in revenues between FY20- 22.
• Steep jump in profits: Global Health’s net profit has risen at a rapid 132% CAGR to Rs 196.20 crore in FY22. 
• Good margins: Global Health has one of the best operating margins in the industry. The net profit margin has improved to 9.06% from just 2.42% in FY20. 
• Reasonable valuations: At the higher end of the price band,  Global Health is attractively priced at post issue at a PE ratio of 38 times annualised FY23  earnings (consolidated). This is lower than peers  Fortis Healthcare, Max Healthcare, and Narayan Hrudayalaya.  
• Global Health Ltd IPO review: Given factors such as a strong rise in revenues, robust margins, steep rise in profits, good runway for growth and reasonable valuations, analysts have given a ‘positive’ rating on the company’s long-term prospects.