Another healthcare company, Narayan Hrudayalaya Ltd., is coming up with its IPO next week, diluting around 14% stake. The IPO of the pharmaceutical company Alkem Laboratories and diagnostic specialist Dr. Lal Path Labs saw a prodigious response from the investors. They were oversubscribed 44.23 times and 33.31 times respectively.
About the company
Now it’s time for Narayan Hrudayalaya. It is a private healthcare company, focused on providing care to the working class populaces i.e. healthcare service at affordable prices. They started as a cardiac care provider, incorporated in the year 2000 by the company’s promoter Dr. Devi Prasad Shetty. However, today it is known for multispecialty hospitals. Theiremphasis is on tertiary care specialties. This is different from other healthcare company as it has presented itself as socially responsible company which helps needy people who cannot pay for high medical cost.
Over 30 specialties, including cardiology, cancer, urology, neurology, etc., are taken care of by Narayan Hrudayalaya.
Headquartered in Bengaluru, the company’s operational spread is mainly at two clusters (regions), where it has preeminent position. One being Bangalore, Karnataka in the south and other being Kolkata, West Bengal on the east. Growing further, the company is building hospitals in other parts of the country too. And hope to create similar strong clusters in central and western India.
Narayan Hrudayalaya Ltd. follows the following business models:
- Self-owned as well as operated hospitals
- Operating hospitals and heart centers and sharing revenues with hospital-premises owner.
- Lease-based or license based operated hospitals, standalone clinics and primary care facility
- Managed Hospitals- only hospital management services provided to third parties.
The revenues of the company come from its three business clusters/ regions. Major portion of the revenue arises from the southern, i.e. Karnataka, cluster; then from the eastern cluster and the western cluster, where there are facilities in Jaipur and Ahmedabad.
The exact number of operating beds, currently,are 544. However, they have built-in capacity of 6602 beds. 4 new hospitals (in Mumbai, Lucknow, Vaishno Devi and Bhubaneshwar) that are still in development stage, put together, have close-to around 1000 beds capacity. These will be built within a period of 2-4 years.
Revenue per occupied bed is about Rs. 58 lakhs annually. And this is projected to rise, not because of the pricing correction but because – as the hospitals mature, they do more complex procedures, which have naturally a higher yield. The utilization of the facilities is also expected to be increase.
Overall the company has 23 multi- and super-specialty hospitals, 8 heart centers and 25 primary care centers. Over last five years the company’s growth has been good, at 30% CAGR.
About the Industry
India’s healthcare has developed yet there is always a demand-supply gap in the healthcare delivery industry. With the technology playing its part, the quality has improved a lot. But yet there are shortages as the country has severe population growth. Demography also has a vital role to play. Urban areas have more specialized facilities. The rural areas have the basic ones only. Affordability is also one key concern of the industry, as government expenditure is less and thus the individuals have to spend on their own for healthcare.
About the Offer
This is a 100% offer for sale, for which the issue will be open from 17th December, 2015 to 21st December, 2015.Narayan Hrudayalaya is not raising any money for the company itself. The company is well postured for its future growth plans. They have sufficient aptitude in terms of both, debt as well as internal accruals, to put up with their growth going forward. However, two of its private equity investors came-in in 2008 and have been with the company for a long time now. They have been very supportive, says the management. So, this is one of the liquidity events for them. Other investors will also be liquidating some of their stakes. A few of the details are as follows:
- 6,287,978 equity shares by Ashoka Investment Holdings
- 8,174,432 equity shares by JPMorgan Mauritius Holdings IV Ltd.
- 1,886,455 by Ambadevi Mauritius Holdings Ltd
- 2,043,608 by Dr. Devi Prasad Shetty
The public issue is for 20,436,081 equity shares having a face value of Rs.10 each. The price band for the issue is Rs. 245 to Rs. 250.
As you can see below, the consolidated income statement doesn’t look very promising with the net margin in the last three years was under 5%.
Its consolidated EPS is not there as the margins are in negative. On standalone basis the EPS stands at 1.51 for FY2015. Based on this on the higher price band of the IPO, the P/E multiple comes to around 160 which is very high. So you should look at investing in this only from long term view.
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