Medi Assist Healthcare Services Ltd

Published by Sharekhan Education | January 15, 2024

Amit Pathak | Sharekhan Education

Medi Assist Healthcare Services Ltd. has an issue size of ₹ 1171.58 C and a price band in the range of ₹ 397-418. The issue opens on Monday, January 15, 2024, and closes on Wednesday, January 17, 2024.

Company Overview:

Medi Assist Healthcare Services Ltd is a well-established health-tech and insurance-tech company. It provides third-party administration services to insurance companies. It also provides other healthcare and ancillary services such as hospitalization, call centers, billing, and claims processing services.

The company acts as a facilitator between insurance companies and their policyholders and has developed a pan-India healthcare provider network that comprises 18,754 hospitals across 1,069 cities. It has a diversified base of group accounts and a strong relationship with most insurance companies.

Objects of Issue:

The entire IPO is an offer for sale, and the company will not receive any proceeds from it. The company expects that the listing of the equity shares will enhance its visibility and brand image. Its listing will also provide liquidity to its shareholders and a public market for its equity shares in India. The minimum application is to be made for 35 shares and in multiples thereon. Post-allotment, shares will be listed on both the BSE and the NSE.

Industry Overview:

Third-party administrators (TPAs) have emerged as prominent players in recent years, with over 60% of the premiums serviced by them in the health insurance sector. As corporations expand their coverage for employees and dependents and offer more prevention, wellness, and health-tracking services, insurers will likely rely on TPAs for cost containment, customized programs, efficient claims processing, and overall management. It is expected to drive significant growth of around 25% in this segment over the next five years.

Competitive Strengths:

The company’s technology-driven infrastructure and services are custom-built and assist various stakeholders, such as insurance companies, hospitals, insurance brokers, and insurance agents. Their operational efficiency allows seamless integration of acquired businesses, optimizing processes, and reducing overhead costs. They offer comprehensive healthcare solutions to customers, encompassing an extensive in-patient and outpatient network, on-demand health services, robust management of fraud, and effective medical inflation control. Their operations are scalable, comprehensive, easy to use, and secure.

Business Strategy:

The company employs a three-pronged strategy, focusing on employee satisfaction, controlling medical inflation for group accounts, and expanding partnerships with key insurance brokers to maintain its leadership position. They plan to enhance their technology platforms. They aim to pursue acquisition opportunities to expand their existing service offerings, increase market share in existing markets, and expand to new geographies.

Key Concerns:

The company has encountered defaults or delays in settling statutory liabilities, such as provident and labor welfare funds. Further defaults may result in financial penalties imposed by relevant government authorities. The top five clients account for more than 70% of revenues, leading to concentration risk. The TPA industry is intensely competitive.

Financials: 

The company has delivered revenue growth of 25% CAGR over FY21–23. EBITDA has increased by a 25.1% CAGR over the same period. PAT has increased by 68.7% CAGR. The PAT margin has expanded from 8.1% to 14.7%. RoE has increased from 9% to 19.7%. The fixed asset turnover ratio has increased from 11.1 to 18.4. At the upper end of the price band (397–418), the issue seems reasonably valued at 38.9x FY23 earnings on post-issue capital.

Source: IPO Red Herring Prospectus

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