Peer valuations justify the price but ……
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GLOBAL HEALTH OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Offer Size | Rs 2,205 Cr (6,56,41,952 equity shares) |
| Fresh Issue | Rs 500 Cr (1,48,80,952 equity shares) |
| Offer for Sale | 5,07,61,000 equity shares (Rs 1,705 Cr) |
| Face Value | Rs 2 |
| Price Band | Rs 319–336 |
| Mkt/Bid Lot | 44 Nos. |
| Implied M-Cap | Rs 9,011 Cr |
| Implied Equity Cap | Rs 53.63 Cr |
| Free Float | 66.92% |
| Lead Manager | Kotak Mahindra Cap, Credit Suisse Sec, Jefferies India and JM Financial |
| Registrar | KFin Technologies |
| Listing | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
|
| Opening :03-Nov-2022 | Closing :07-Nov-2022 |
| Allotment :11-Nov-2022 | Refunding :14-Nov-2022 |
| Demat Credit :15-Nov-2022 | Trading :16-Nov-2022 |
The Offer
The Gurgaon head-quartered Global Health Ltd (GHL) is entering the capital market with a Rs 2,205 Cr IPO which consists of a fresh issue of Rs 500 Cr (1,48,80,952 equity shares) and an offer for sale of 6,56,41,952 equity shares (Rs 1,705 Cr). The offer is being made through the book-building route with a price band of Rs 319-336 for Rs 2 paid-up share.
Applicants for the IPO should bid for a minimum lot of 44 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Wednesday, November 16, 2022. Kotak Mahindra Capital, Credit Suisse Securities, Jefferies India and JM Financial are the lead-managers to the offer. KFin Technologies has been roped in as the registrar to the issue. The bidding opens on Thursday, November 3, 2022 and closes on Monday, November 07, 2022.
The company proposes to utilize the net proceeds from the fresh issue (Rs 500 Cr) towards repayment of loans of two of its subsidiaries viz., Global Health Patliputra Private Ltd and Medanta Holdings Private Ltd to the extent of Rs 375 Cr. The balance amount is earmarked for general corporate purposes.
Lineage
Incorporated on August 13, 2004, GHL’s was founded by Dr. Naresh Trehan, a world-renowned cardiovascular and cardiothoracic surgeon. GHL operates under the “Medanta” brand. It has a network of five hospitals in Gurugram, Indore, Ranchi, Lucknow and Patna. One hospital in Noida is under construction.
The company has established institutes of excellence that integrate medical care, teaching and research all the while providing affordable medical services to patients. The hospital at Gurugram was ranked as the best private hospital in India for three consecutive years in 2020, 2021 and 2022. It 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.
It was also featured in the list of world’s best specialized hospitals for cardiology and neurology in 2022 and the list of world’s best specialized hospitals for cardiology in 2021 by Newsweek and was awarded the ‘Best Multi-Speciality Hospital – National’ at the ‘Economic Times Healthcare Awards 2021’ and ranked as the best multispecialty private hospital in North India by ‘The Week’ in 2021.
Key Management
Dr. Naresh Trehan, the sole promoter of the company, is the Chairman and Managing Director. He holds a bachelor’s degree in medicine and surgery from the Faculty of Medicine, University of Lucknow and has been awarded a certificate in specialty of thoracic and cardiac surgery by the American Board of Thoracic Surgery. He has served in the training programme and as the ‘Fellow in Thoracic Surgery’ at the New York University Medical Center at Bellevue Hospital, University Hospital and Mahattan V.A. Hospital, New York, USA. He is also an elected fellow of the American Society of Angiology and the Indian Association of Cardiovascular-thoracic Surgeons. He has been admitted to honorary fellowship of the Royal Australasian College of Surgeons in 2000. He has been awarded the academic title of ‘Honorary Professor’ of the National Scientific Research Medical Center Joint Stock Company, The Republic of Kazakhstan. He has been awarded the ‘Padma Shri’ in 1991 and the ‘Padma Bhushan’ in 2001 by the Government of India and Dr. B.C. Roy Award by Medical Council of India in 2005. Last year, he was also conferred a special award by the American Association of Cardiologists of Indian Origin for his outstanding contributions as ‘Indian Father of Cardiac Surgery’.
Stakeholders
Currently, Dr. Naresh Trehan, the sole promoter of the company holds 35% of the equity capital of Rs 50.66 Cr while investor-selling shareholder Anant Investments and Sunil Sachdeva, who is also a director in the company, hold 25.7% and 13.4% respectively. Post-offer for sale, Dr. Trehan will hold the same number of shares but with a reduced percentage (33%) as he is not offloading his stake. Sunil Sachdeva will hold 12.6% at an average cost just Rs 1.03 a share and Anant Investment will hold only 5% at an extremely negative cost of -533.54 a share!
Business
GHL is one of the largest private multi-specialty tertiary care providers operating in the North and East regions of India in terms of bed capacity and operating revenues. The key specialties of GHL include cardiology & cardiac science, neurosciences, oncology, digestive & hepatobiliary sciences, orthopaedics, liver transplant and kidney & urology. The company provides healthcare services in over 30 medical specialties. It has engaged over 1,300 doctors. Its operational hospitals, spanning over an area of 4.7 million sq. ft., have 2,467 beds.
Financial Track
Having posted lackluster results for two consecutive years on account of COVID, the 18-year-old GHL has put up an extra-ordinary performance on the eve of its IPO. In fiscal 2022 revenue has surged from less than Rs 1500 to over Rs 2160 Cr. EBIDTA margin has climbed from 15.5% to 22.9%. Net profit has pole-vaulted from Rs 30 Cr to Rs 196 Cr! This certainly looks attractive against the post IPO equity capital of around Rs 54 Cr.
|
Global Health Consolidated Financials (in Cr) |
|||||
| Period Ended |
Jun-22 |
Mar-22 | Mar-21 | Mar-20 |
Mar-19 |
| Revenue |
617 |
2167 | 1447 | 1500 |
1456 |
| Operating Profit |
133 |
451 | 194 | 188 |
170 |
| OPM% |
21.5 |
20.8 | 13.4 | 12.5 |
11.7 |
| Other Income |
9 |
39 | 31 | 44 |
50 |
| EBIDTA |
142 |
490 | 225 | 232 |
220 |
| EBIDTA % |
23.5 |
22.9 | 15.5 | 15.2 |
14.8 |
| Interest |
19 |
79 | 67 | 52 |
33 |
| Depreciation |
36 |
130 | 123 | 115 |
102 |
| Except Item |
0 |
0 | -2 | -1 |
-2 |
| Tax |
24 |
86 | 37 | 50 |
52 |
| Net Profit |
59 |
196 | 30 | 36 |
51 |
| Equity (Implied) |
54 |
51 | 50 | 49 |
49 |
| Reserves (Implied) |
2127 |
1565 | 1300 | 1268 |
1214 |
| Borrowing |
794 |
838 | 578 | 606 |
503 |
| Fixed Assets |
2230 |
2215 | 2080 | 2085 |
1860 |
Valuation
On the post-issue enhanced capital, the IPO cap price discounts the fiscal 2022 earnings more than 45 times which may not sustain should the market takes turn. Nevertheless, the current discounting of hospital peers like Apollo, Max and Fortis Health makes GHL’s pricing look reasonable.
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HOW GLOBAL HEALTH COMPARES WITH PEERS |
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Financials |
||||||
| (Amount in Cr) |
Global |
Apollo | Max Health | Fortis Health | Narayana Hruday |
Aster DM Health |
| Market Cap |
9011 |
65695 | 41718 | 21007 | 15594 |
12131 |
| Borrowing |
838 |
2636 | 727 | 966 | 545 |
2192 |
| Fixed Assets |
2215 |
7387 | 4714 | 5486 | 1989 |
6919 |
| Revenue |
2167 |
14663 | 3931 | 5718 | 3701 |
10253 |
| Other Income |
39 |
78 | 127 | 27 | 35 |
51 |
| EBIDTA |
490 |
2263 | 1070 | 1096 | 688 |
1534 |
| Interest |
79 |
379 | 101 | 147 | 66 |
257 |
| Net Profit |
196 |
807 | 614 | 451 | 351 |
599 |
| Equity Cap |
54 |
72 | 970 | 755 | 204 |
497 |
| Reserves |
2127 |
5565 | 5313 | 7502 | 1284 |
3456 |
| Acc. Loss |
0 |
0 | 0 | 2078 | 0 |
0 |
|
Stock Features |
||||||
| Current Price (Rs) |
336 |
4569 | 430 | 278 | 763 |
244 |
| Face Value (Rs) |
2 |
5 | 10 | 10 | 10 |
10 |
| Book Value |
81 |
392 | 65 | 82 | 73 |
80 |
| Promoter Stake % |
33 |
29 | 51 | 31 | 64 |
38 |
| Debt/Equity |
0.4 |
0.5 | 0.1 | 0.2 | 0.4 |
0.6 |
|
Profitability |
||||||
| OPM % |
20.8 |
14.9 | 24.0 | 18.7 | 17.7 |
14.5 |
| Net Margin % |
8.9 |
5.5 | 15.1 | 7.8 | 9.4 |
5.8 |
| Cash EPS |
12.16 |
94.30 | 8.61 | 6.85 | 26.13 |
23.2 |
| Earnings Per Share |
7.32 |
52.52 | 6.33 | 2.86 | 17.15 |
10.31 |
|
Growth |
||||||
| CAGR 3Yr Sales % |
14.2 |
15.0 | 32.6 | 8.9 | 9.1 |
8.9 |
| CAGR 3Yr EBIDTA % |
30.5 |
27.4 | 71.5 | 51.1 | 31.2 |
19.6 |
|
Return |
||||||
| RONW % |
11.7 |
14.3 | 9.8 | 4.4 | 23.6 |
15.1 |
| ROCE % |
14.3 |
20.1 | 12.1 | 7 | 24.8 |
14.5 |
|
Discounting |
||||||
| Price/Earnings |
45.9 |
87.0 | 67.9 | 97.2 | 44.5 |
23.7 |
| Price/Cash EPS |
27.6 |
48.5 | 50.0 | 40.6 | 29.2 |
10.5 |
| Price/Book Value |
4.1 |
11.7 | 6.6 | 3.4 | 10.5 |
3.1 |
| Price/EBIDTA |
18.4 |
29.0 | 39.0 | 19.2 | 22.7 |
7.9 |
| Price/Revenue |
4.2 |
4.5 | 10.6 | 3.7 | 4.2 |
1.2 |
| Price/Fixed Assets |
4.1 |
8.9 | 8.9 | 3.8 | 7.8 |
1.8 |
|
Distribution |
||||||
| Dividend % |
0 |
235 | 0 | 0 | 10 |
0 |
| Yield % |
0 |
0.3 | 0 | 0 | 0.1 |
0 |
| Pay-out % |
0 |
20.9 | 0 | 0 | 5.8 |
0 |
Concern
- Certain land parcels on which the hospital buildings and clinics operate are neither owned by GHL nor leased to the company on a perpetual basis. Any breach of the terms or non-renewal of the lease agreement may lead to disruptions and affect the share prospects.
- Subsidiary Global Health Patliputra’s loss is mounting (Rs 45.81 Cr in fiscal 2022).
- Litigations against the company involve an aggregate amount of Rs 146 Cr. Any adverse outcome of these cases would impact the share price.