Should you invest in Global Health Limited (“Medanta”) IPO ? – myMoneySage Blog

Global Health Limited incorporated on August 13, 2004, is one of the largest private multi-specialty tertiary care providers operating in the North and East regions of India, with key specialties of cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopedics, liver transplant, and kidney and urology. Its hospital at Gurugram was ranked as the best private hospital in India for 3 consecutive years in 2020, 2021, and 2022, and was the only Indian private hospital to be featured in the list of Top-200 global hospitals in 2021 and was featured in the list of Top-250 global hospitals in 2022 by Newsweek.

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Medanta has a network of 5 hospitals currently in operation (Gurugram, Indore, Ranchi, Lucknow, and Patna), and 1 hospital (Noida), which is under construction. As of June 30, 2022, they provide healthcare services in over 30 medical specialties and engage over 1,300 doctors led by highly experienced department heads, and, spanning an area of 4.7 msf, their operational hospitals have 2,467 installed beds.

Promoters & Shareholding:

Dr. Naresh Trehan is the company promoter.

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Public Issue Details:

Offer for sale: OFS of approx. 50,761,000 equity shares at Rs. 2, aggregating up to Rs. 100 Cr and fresh of approx. 14,880,952 equity shares at Rs. 2, aggregating up to Rs. 500 Cr.

Total IPO Size: Rs. 881.22 Cr.

Price band: Rs. 319 – Rs. 336.

Objective: For repayment/prepayment of borrowings and general corporate purposes.

Bid qty: minimum of 44 shares (1 lot) for Rs. 14,784 and maximum of 13 lots.

Offer period: 3rd Nov 2022 – 7th Nov 2022.

Date of listing: 16th Nov 2022.

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Pros:

  • One of the largest private multi-specialty tertiary care providers operating in the North and East regions of India.
  • Focus on Clinical Research and Academics.
  • The company has adopted a ‘doctor-led’ model of management.
  • Large-scale hospitals with world-class infrastructure and high-end medical equipment and technology.
  • Focus on under-served areas with dense population and presence in top or capital cities of large states.
  • The company has consistently delivered high operational and financial performance through high patient volumes, cost efficiency, and diversified revenue streams across medical specialties.

Risks:

  • Its subsidiaries, MHPL and GHPPL, have incurred losses in the preceding Fiscals and may incur losses in the future.
  • It may not have sufficient insurance coverage to cover all possible economic losses and this may hurt its business.
  • Subject to medical and legal risks associated with the operation of medical facilities and in-house pharmacies.

Subscribe or avoid?

Sectorial outlook – The total hospital market size in India in the financial year 2020 was expected to be approximately Rs. 4270 billion growing at a CAGR of 13{b22d389557d8c12f75f7c6a23bee735d1a0434802b5d6d1d7fd3193277efabf2} between the financial years 2016 and 2020. The Indian Healthcare delivery market is estimated to grow to Rs. 5 trillion in the financial year 2022 with the majority of growth being contributed by a low base and the pent-up demand from deferred treatments in the financial year 2021. With renewed impetus from PMJAY and government focus shifting onto the healthcare sector, the healthcare delivery market is expected to grow at 15-17{b22d389557d8c12f75f7c6a23bee735d1a0434802b5d6d1d7fd3193277efabf2} CAGR and reach Rs. 7.67 trillion in the financial year 2025. Growth in household incomes and, consequently, disposable incomes, are critical to the overall growth in demand for healthcare delivery services in India. The share of households falling in the income bracket above Rs. 0.2 million is expected to increase to 35{b22d389557d8c12f75f7c6a23bee735d1a0434802b5d6d1d7fd3193277efabf2} in the financial year 2022 from 23{b22d389557d8c12f75f7c6a23bee735d1a0434802b5d6d1d7fd3193277efabf2} in the financial year 2017 and this is expected to have a positive impact on the hospital sector.

The financials (revenue and net profit) are shown in the graph below:

Valuation – For the last 3 years average EPS is Rs. 3.45, the P/E is around 97x on the upper price band of Rs. 336. The EPS for FY22 is Rs. 7.77 and the P/E is around 43.2x. If we annualize Q1-FY23 EPS of Rs. 9.24, P/E is around 36.36x. It has Apollo Hospitals (71.4x), Fortis Healthcare (51.8x), Max Healthcare (47.8x), and Narayan Hrudayalaya (41.8x) as its listed peers as per the RHP. The company’s P/E is between 43.2x and 97x. Its revenue has been growing consistently and its margins have been improving since last year. Looking at the valuation, it seems to be reasonable when compared to its peers.

Recommendation – The Company is one of the largest private multi-specialty tertiary care providers in terms of bed capacity and operating revenues. It has adopted a “doctor-led” model driven by skilled and experienced doctors in the healthcare space and it is also well supported by prominent institutional investors like The Carlyle Group and Temasek Group. After considering all the factors the listing seems reasonably priced hence we would recommend investors to “Subscribe” to this IPO medium to long-term perspective.

Disclaimer:

This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.

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