Medi Assist Healthcare Services IPO kicks off: Should you subscribe to the issue?

Medi Assist Healthcare Services's initial public offering (IPO) kicked off for subscription on Monday, January 15. The company is offering its shares in the range of Rs 397-418 apiece with a lot size of 35 shares. The three-day bidding for the issue will conclude on Wednesday, January 17.

Medi Assist Healthcare Services is a health-tech and insurance-tech company that manages health benefits for employers, retail members, and public health schemes, primarily serving insurance companies. Incorporated in June 2002, Medi Assist offers medical insurance and cashless hospitalization through a network of healthcare service providers.

The company is looking to raise a total of Rs 1,171.58 crore via IPO, which is entirely an offer-for-sale (OFS) of 2,80,28,168 shares by promoters and other selling shareholders.  It mobilised Rs 351.50 crore through anchor allotment, which includes investors such as Nomura Trust, Goldman Sachs, Ashoka Whiteoak, Pinebridge Global Funds, Troo Capital and HSBC by allocating 84,08,449 shares at Rs 418 apiece.

The company will not receive any proceeds from the IPO as the issue is an OFS. Promoters Dr Vikram Jit Singh Chhatwal, Medimatter Health Management, Bessemer Health Capital, Investcorp Private Equity Fund I and other nine selling shareholders will offload stakes in the issue.

Medi Assist Healthcare acts as a mediator between general and health insurance companies and their insured members, insurance companies and healthcare providers, and the Government and beneficiaries of public health schemes. The company collaborated with 36 insurance companies in India and worldwide, as of March 31, 2023.

As of March 31, 2023, the company established a healthcare network across India, with over 14,000 hospitals in 967 cities and towns in 32 states and union territories. During FY2023, the company settled 5.27 million claims, comprising 2.44 million in-patient claims and 2.83 million out-patient claims.

Medi Assist Healthcare reported a net profit at Rs 22.49 crore with a revenue of Rs 312.03 crore for the period ended on September 30, 2023. The company clocked a net profit at Rs 74.04 crore with a revenue of Rs 518.96 crore for the financial year ended on March 31, 2023.

Medi Assist Healthcare has reserved 50 per cent shares for the qualified institutional buyers, while retail investors will get 15 per cent of allocation for the issue. Non-institutional investors will get the remaining 15 per cent of the allocated in the issue.

Also read: Medi Assist Healthcare Services IPO to open on Jan 15; price band, other details

Axis Capital, IIFL Securities, Nuvama Wealth Management and SBI Capital Markets are the book-running lead managers for the issue, while Link Intime India is the registrar for the IPO of Medi Assist Healthcare. The shares of the company shall be listed on both BSE and NSE with January 22 as the listing date. Here' what a host of brokerage firms say about the IPO of Medi Assist:

Canara Bank Securities
Rating: Subscribe
The company's reach has expanded, making it a unique player in the insurance industry's third-party administration market, said Canara Bank Securities. "From FY21 to FY23, the company's top line increased at a 25 per cent CAGR. The company’s asking P/E stands at 38 times FY23 earnings. We recommend subscribing to the isse for listing gains, and long term," it said.

Anand Rathi Research
Rating: Subscribe for long term
Medi Assist Healthcare is one of the most established third-party administrators in the country. The company has tie ups with around 9,500 employers in the country. Also, the company is increasing its focus on both in – patients as well as outpatients in the markets, said Anand Rathi Research.

"At the upper price band, the company is valued at a P/E ratio of 38.2 of its FY23 earnings with a market cap of Rs 2,878.3 crore post issue of equity shares. We believe that valuations of the company are fairly priced and recommend a 'subscribe for long term' rating to the IPO," it added.

StoxBox by BP Equities
Rating: Subscribe
The company's ability to reduce acquisitions has been a key strength, enabling it delivering superior value to customers. The company has a record of sustained consolidated revenue from operations, growing at a CAGR of 25.1 per cent during FY21-23.

"Medi Assist intends to pursue acquisition opportunities to expand existing service offerings, increase market share in existing markets, or expand to new geographies. Medi Assist also wants to pursue opportunities for carve-outs and alliances with insurance companies and focus on partnerships with employers and distributors," it added, recommending a 'subscribe' rating.

Choice Broking
Rating: Subscribe
There are no comparable peers having business models similar to Medi Assist Healthcare, said Choice Broking.  Considering the nature of the operations, the existing peers are considered only for benchmarking the demanded valuation, it said. At a higher price band, Medi Assist is demanding a P/E multiple of 34.8 times, which is at discount to the peer average of 42.6 times, the brokerage said..

"The issue is attractively priced. The company is catering to the fast-growing health insurance sector. Thus, considering its dominant share in the TPA market, consistent financial performance, healthy cash flow generation and dividend payout, we assign a 'subscribe' rating for the issue," it added.

Swastika Investmart
Rating: Neutral
Medi Assist Healthcare has scalable, technology-enabled infrastructure that addresses the needs of all constituents of the health insurance ecosystem. It has a diversified base of group accounts and a strong relationship with the majority of insurance companies. Financially, the company exhibits encouraging metrics, said Swastika Investmart.

"Medi Assist concentrates a significant portion of its revenue on a limited number of clients, and its subsidiaries play a crucial role in its overall performance, introducing dependencies. The offering being a pure OFS with a premium valuation warrants a cautious approach. The identified risks and premium valuation necessitate careful assessment by investors," it added with a 'neutral' rating.

Ventura Securities
Rating: Subscribe
Medi Assist Healthcare operates as a holding company with nine subsidiaries, four direct and five indirect. It provides third-party administration services, contributing significantly to its revenue. It acts as a facilitator between insurance companies, policyholders, healthcare providers, and the government, said Ventura Securities, which has a subscribe rating on the issue.

"The company's operational efficiency and technology ecosystem allow seamless integration of acquired businesses, optimising processes and reducing overhead costs. It continues to explore growth opportunities and pursue strategic M&A activities, its commitment to innovation, technological excellence, and comprehensive healthcare solutions reinforces its leadership," it added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

Also read: Stock recommendations by analyst for January 15, 2024: BoI, L&T and Sonata Software