Yatharth Hospital IPO opens today: Should you subscribe to the issue?

The initial public offering (IPO) of Yatharth Hospital and Trauma Care Services will open for subscription on Wednesday. The hospital chain has set Rs 285-300 as the price band for the issue, with a lot size of 50 equity shares. The issue will conclude on Friday, July 28. Yatharth Hospital and Trauma Care Services is looking to raise about Rs 687 crore via primary markets, which includes a sale of fresh equity shares worth Rs 490 crore and an offer for sale (OFS) of around 65.52 lakh equity shares by its promoters including Vimla Tyagi, Prem Narayan Tyagi and Neena Tyagi. Incorporated in 2008, Yatharth Hospital is a hospital chain that operates four-super specialty hospitals located in Noida, Greater Noida, and Noida Extension. The company recently acquired a 305-bedded multi-specialty hospital in Orchha, Madhya Pradesh to extend its operations and services. The net proceeds from the issue will be used for repayment or prepayment of borrowings availed by the company and/or its subsidiaries, namely AKS Medical & Research Centre and Ramraja Multispeciality Hospital & Trauma Centre. It will also be used for funding capital expenditure, inorganic growth initiatives and general corporate purposes. Ahead of the IPO, Yatharth Hospital allocated 68,65,506 equity shares to 18 anchor investors at a price of Rs 300 apiece to raise Rs 205.96 crore. They included marquee investors included ICICI Prudential, Nippon Life, HDFC Mutual Fund, Aditya Birla Sun Life, Bandhan Mutual Fund, HSBC Global Investment, Troo Capital, Carnelian Capital, BNP Paribas, Goldman Sachs and Jupiter India Fund among others. For the financial year ended on March 31, 2023, Yatharth Hospital reported a net profit at Rs 65.77 crore with a total revenue of Rs 523.10 crore. The company's net profit came in at Rs 44.16 crore with a total revenue at Rs 402.59 crore in the previous financial year. A total of 50 per cent of the issue is reserved for the qualified institutional bidders (QIBs). The non-institutional investors (NIIs) quota is set at 15 per cent. The rest 35 per cent shares will be allocated to retail investors. Intensive Fiscal Services, Ambit and IIFL Securities are the book running lead managers to the issue, while Link Intime India has been appointed as the registrar to the issue. The stock will be listed on both BSE and National Stock Exchange (NSE), with August 7 as the tentative date of listing. Brokerage firms are mostly positive on the issue and have suggested subscribing for the issue. However, select brokerage firms are skeptical over the issue on the back of high fixed cost, debt-heavy operational expenses, dependency on select special facilities and government deals compressing the margins. Here's what a host of brokerage firms said about the issue:Reliance Securities Rating: Subscribe India’s current healthcare expenditure is largely dominated by private expenditure. North India regions including Haryana, Uttar Pradesh and Uttarakhand have lower than average doctor and nurse density per 10,000 population. This is expected to improve going ahead while favouring the company’s expansion plans, said Reliance Securities. "Their recent acquisition of the Jhansi-Orchha hospital is aimed at further expanding into new geographies and growing their presence in the regional healthcare market. They intend to focus on building capabilities for new, more advanced specialties which have high demand in the respective micro markets and deliver a higher ARPOB," it added with a subscribe rating.Stoxbox Rating: Subscribe Yatharth has witnessed steady growth in its top and bottom lines, with the PAT margin growing from 8.57 per cent to 12.64 per cent and its ROE improving from 25.06 per cent to 35.95 per cent during FY 21-23. The company is likely to retire debt from the IPO proceeds which is expected to improve its profitability. The issue is fairly valued, said Stoxbox with a 'subscribe' tag.Canara Bank Securities Rating: Subscribed for listing gains Yatharth has bed capacity of 1405 beds out of which 394 beds are engaged for critical care. Prices of the hospitals are 20 per cent cheaper than peers to make their brand known among people. They have expansion plans near parts of Uttar Pradesh and Delhi. They have reported robust financial performance across the major parameters, said Canara Bank Securities with 'subscribe' tag. "This issue is available at P/EPS of 29.73 times, which is lower as compared to peer competitors. This cannot be an apple-to-apple comparison, as this hospital is mainly concentrated in Delhi and they are emerging as a multi speciality hospital among renowned peers. Their revenue contributes majorly 34% from government deals which can stretch the debtor days and margin," it said.Geojit Financial Services Rating: Subscribe for long term At the upper price band, Yatharth is available at a P/E of 39.2 times, based on FY23 EPS, which appears to be reasonably priced compared to its peers. Considering its consistent topline growth, stable margins, strategic acquisition, revival of medical tourism, and promising industry outlook, we assign a 'subscribe' rating on a medium to long term basis, said Geojit Financial.Hensex Securities Rating: Subscribe Yatharth is among the leading super specialty hospitals in Delhi NCR, operates three super specialty hospitals in Delhi-NCR with diverse specialty and payer mix. It has an experienced and qualified professional management team with a strong execution track record. It has a track record of stable operating and financial performance and growth, said Hensex Securities with a subscribe rating. "The company operates in a heavily regulated industry and is required to obtain a number of approvals and licenses from governmental and regulatory authorities. It operates in an industry with high fixed costs, failure to achieve favourable pricing on medical consumables, pharmacy items, drugs, and surgical instruments," the brokerage cited as the key risks for the issue.Marwadi Finance Services Rating: Subscribe Considering the FY23 EPS of Rs 7.66 on a post issue basis, the company is going to list at a P/E of 39.16 times with a market cap of Rs 2,575.5 crore whereas its peers Apollo Hospitals, Fortis Healthcare, Narayana Hrudalaya, Max Healthcare, KIMS and Global Health Limited are trading at a P/E of 48-253 times, said Marwadi Financial Services. "We assign 'subscribe' rating to this IPO as the company is one of the leading super-specialty hospitals in Delhi NCR; this institution boasts a diverse range of specialties and payer mix, demonstrating a track record of consistent and stable operating and financial performance, with sustained growth. Also, it is available at a reasonable valuation compared to its peers," it said.Asit C Mehta Investment Interrmediates Rating: Subscribe Yatharth has advanced and high-end medical equipment and technology. Further, we believe active collaborations with leading institutions and experts in different medical areas to improve their diagnostic and treatment capabilities and expansion in other geographical areas through inorganic growth to drive growth, said Asit C Mehta said with a subscribe for long term rating.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)