Global Health IPO Fundamental Analysis (May Apply)

Medanta (Global Health) IPO Review

Medanta is a private multi-specialty tertiary care providers operating in the North and Eastern regions of India with key specialties of cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and kidney and urology, Five hospitals are currently in operation (Gurugram, Indore, Ranchi, Lucknow and Patna) under Medanta brand and one hospital (Noida), which is under construction. As at June 30, 2022, the hospitals has over 1,300 doctors led by experienced department heads and, span in an area of 4.7 million sq. ft. and have 2,467 installed beds.

In Fiscal 2021, we took the outpatient department pharmacies in-house at our Gurugram, Lucknow, Indore and Ranchi hospitals, and launched outpatient department pharmacy at south Delhi clinic and home care services in Gurugram and New Delhi. In Fiscal 2022, we launched the outpatient department pharmacy at our Patna hospital. Our pharmacies provide convenient access to necessary pharmaceuticals for patients.

Financial Review

Medanta posted revenue from operations of Rs 626.54 crore for Q1FY23 and PAT of Rs 58.71 crore for the same period. The topline for FY21 has suffered a setback due to the pandemic. Revenues for FY22 showed an increase of 50% to Rs 2205.82 crore from Rs 1478.16 crore in FY21 and thus this increase led to a jump in PAT to Rs 196.20 crore during FY22 from Rs 28.81 crore for FY21. Profitability margins have been strong as can be seen in the table below.

Return on net worth has been 3.5% for Q1FY23 and 12% for FY22. Debt to equity has remained at 0.5x for all the last three fiscals.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Particulars	Q1FY2023	Q1FY2022	FY2022	FY2021	FY2020
Total Revenue	626.54	491.58	2205.82	1478.16	1544.27
Revenue from Operations	617.21	485.49	2166.59	1446.74	1500.42
PAT	58.71	41.76	196.20	28.81	36.33
EBITDA	141.65	105.77	489.76	222.85	230.45
Total Assets	3221.94	2855.11	3145.52	2694.11	2666.29
Net cash from operating activities	137.64	76.46	311.26	241.77	175.07
EBITDA Margin	22.95%	21.79%	22.61%	15.40%	15.36%
Net Margin	9.37%	8.50%	8.89%	1.95%	2.35%

Valuation and Peer Comparison

The IPO is valued at 43.19x with FY22 EPS of 7.78 calculated at the upper price band of Rs 336 per share. At annualized Q1FY23 earnings of 9.28, IPO is priced at 36.21x. The industry average P/E is 51.93x, hence the IPO appears to be fully priced. It could have been more attractive if the price was lower. Apollo, Max, Fortis and Narayana Hrudalaya are shown as peers as per the RHP. Key comparatives can be seen in the peer comparison table.

Table 2 - Listed Peer Comparison
Parameters	Apollo	Fortis	Max Healthcare	Narayana	Global Health
Face Value/share	5	10	10	10	2
Total Income for FY22 (Cr)	14740.80	5744.90	4058.82	3735.90	2208.80
EPS	73.42	7.35	6.25	16.84	7.78
NAV Per Share	408.78	92.83	64.79	72.88	63.82
Return on net worth	18.86%	11.27%	9.63%	22.97%	12.14%
P/E	58.53	37.31	68.55	43.33	NA

Issue Details

Medanta/Global Health IPO opens on 3rd Nov- 7th Nov 2022 with a price band of 319-336 per share. Retail quota is 35% and investors can apply with minimum bid of 44 shares (Rs 14,784). Maximum lot size is 572 shares (Rs 1,92,192).The issue is both fresh issue (Rs 500 crore)and offer for sale (Rs 1705 crore) by promoter group, investor shareholders; Anant Investments and Sunil Sachdeva. The Issue is expected to list on 16th Nov 2022. The net proceeds from fresh issue would be utilized to prepay debt (Rs 375 crore) and other corporate purposes.

Conclusion and Investment Strategy

Medanta was founded by Dr. Naresh Trehan, a world-renowned cardiovascular and cardiothoracic surgeon. For the last three years (2022, 2021 and 2020), its hospital in Gurugram has been rated as the best private hospital in India by Newsweek. The Issuer has good patient volumes, cost efficiency and its financial profile also shows an increasing trend in topline as well as bottomline.

The limiting factors are a fully priced issue and a major proportion of offer for sale in the IPO. The promoter shareholding would come down to 33% post IPO is another concern. The investors shall decide as per their risk appetite as 4-5 IPOs are set to release in the near term.

Reviewer recommends May Apply to the issue.

Review By CA Priyanka Choudhary on 25th Oct 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.