Yatharth Hospital and Trauma Care Services Ltd. IPO

Published by Sharekhan Education | July 26, 2023

Yatharth Hospital and Trauma Care Services Ltd IPO is all set to enter the market with an IPO size of ₹687 Crores. The price band for the IPO has been set at ₹285 to ₹300 per share. Investors can participate in this opportunity from Wednesday, 26th July 2023, until the issue closes on Friday, 28th July 2023.

Company Overview:

Yatharth Hospital and Trauma Care Services Ltd. operates a chain of private hospitals in the National Capital Region of Delhi (Delhi NCR). It currently manages three super specialty hospitals located in Noida, Greater Noida, and Noida Extension. Boasting a team of approximately 609 doctors, the company provides healthcare services across various specialties. The hospitals hold accreditation from the NABH and have tie-ups with government organizations and third-party insurance companies. Additionally, the recent acquisition of a 305-bed multi-specialty hospital in Orchha, has increased the total bed capacity to 1,405. The company’s medical facilities feature advanced equipment, such as the 1.5 Tesla whole-body MRI with optical digital broadband.

Objects of Issue:

Yatharth Hospital IPO includes a fresh issue of equity shares amounting to Rs 490 crores and an offer for sale (OFS) of up to Rs 197 crores by existing shareholders. The proceeds from the fresh issue will be utilized for funding inorganic growth initiatives, proposed capital expenditure, and repayment of borrowings. Investors can apply for a minimum of 50 shares and in multiples thereafter. Following the allotment, the shares will be listed on both BSE and NSE.

Industry Overview:

CRISIL Research predicts a promising growth trajectory for the Indian healthcare delivery industry, with a projected 15-17% CAGR over FY22-25. This growth is driven by factors such as an increase in lifestyle-related ailments, rising medical tourism, higher incomes, and government schemes like Ayushman Bharat. In response to these trends, major hospital chains have expanded their reach to Tier II locations to create a robust referral network in their main centers, tapping into underserved areas. The sector has witnessed consolidation in recent years, with larger hospital brands gaining a competitive edge through stronger financial discipline and negotiating power with suppliers. Private equity investments in the industry are also on the rise, with a focus on hospital portfolio consolidation.

Competitive Strengths:

Yatharth Hospital and Trauma Care Services Ltd. boasts a diversified revenue base in terms of specialties, hospitals, and customer mix. This diversity allows them to implement differential pricing and marketing strategies more effectively. With advanced medical technology and diagnostic instruments at their disposal, the company provides healthcare services from primary to tertiary levels, positioning itself as a comprehensive destination for patient needs in its respective micro markets. The company attributes much of its success to its experienced and qualified professional management team, which has a proven track record of successful execution.

Business Strategy:

The company’s strategic vision includes strengthening its super-specialties by attracting reputed and experienced doctors. They aim to establish the Noida Extension Hospital as their Center of Excellence for comprehensive oncology treatment while developing the Greater Noida hospital into their Organ Transplant Centre. Additionally, they are exploring expansion opportunities through asset-light models, with a focus on increasing bed capacity and geographical reach through the acquisition of new hospitals.

Key Concerns:

Operating in a heavily regulated industry, Yatharth Hospital and Trauma Care Services Ltd. faces the challenge of obtaining numerous approvals and licenses from government and regulatory authorities. Any delays or failures in securing or renewing these approvals may adversely impact the company’s business operations and cash flows. Moreover, the industry’s high fixed costs could present difficulties in achieving favorable pricing on medical consumables, drugs, and surgical instruments from suppliers. The inability to pass on cost increases to patients could also affect profitability.

Financial Performance:

Over the past few years, Yatharth Hospital and Trauma Care Services Ltd. has demonstrated strong financial growth. Between FY21 and FY23, the company achieved a remarkable 50.8% CAGR in operating revenue, while EBITDA increased by 41.3% CAGR during the same period. Net Profit witnessed significant growth, with an 83.2% CAGR. The Average Revenue per Occupied Bed rose from around ₹21,000 in FY21 to ₹26,000 in FY23, and the Bed Occupancy Rate improved from 41% to 45%. Additionally, the company managed to improve its Debt-to-Equity ratio from 2.5 in FY21 to 1.4 in FY23. The Return on Capital Employed (RoCE) also expanded from 18.4% in FY21 to 26.1% in FY23. Based on FY23 EPS, the issue appears reasonably priced at 39.2x at the upper end of the price band (₹285-300). Source: IPO Red Herring Prospectus

Conclusion:

While the company showcases commendable financial performance and competitive strengths, investors should be mindful of the key concerns associated with the regulated nature of the industry and cost dynamics. As always, it is essential for investors to conduct thorough due diligence and consider their investment objectives and risk tolerance before participating in the Yatharth Hospital IPO.

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