Yatharth Hospital and Trauma Care Services Limited IPO

About the company:

Yatharth Hospital & Trauma Care Services Ltd

It is a multi-care hospital chain incorporated in the year 2008 which operates through super specialty hospitals situated in Noida, Greater Noida, Noida Extension & Jhansi-Orchha (UP). It is among the top 10 largest private hospitals in the Delhi NCR region. The Noida Extension Hospital has 450 beds and is one of the largest hospitals in the area. The total Bed Capacity is 1,405 beds including a recently acquired 305-bedded multi-specialty hospital in Orchha, MP.

Hospitals have been designed in accordance with International Quality Standards with various amenities and facilities for faster recovery & safety of patients. 3 hospitals in Delhi NCR are NABH certified, and in which two hospitals are NABL certified.

Along with advanced technology, the entity has a team of 3,303 individuals of which 609 doctors, 799 nurses, 379 para-medic staff, and 1,516 corporate & other staff members as of 31st March 2023.

IPO Details:

The company did a pre-IPO placement worth Rs. 120 cr., at a price of Rs. 300 per share for 4,00,000 equity shares, and its fresh public issue is reduced to that extent.

The Objective of Fresh Issue:

• Repayment/ prepayment, in full or part, of the company’s borrowings. (~Rs. 100 Crs)

• Repayment/ prepayment, in full or part, of certain borrowings availed by Subsidiaries, i.e., AKS & Ramraja (~Rs. 145 Crs)

• Funding capital expenditure of two hospitals, situated at Noida & Greater Noida. (~Rs. 25.6 Crs)

• Funding capital expenditure expenses of Subsidiaries. (~Rs. 106.9 Crs)

• Funding for inorganic growth through acquisitions and other strategic initiatives. (~Rs. 65cr)

• Balance general corporate purposes.

Key Strengths & Opportunities:

• The leading super specialty hospital in Delhi NCR with a diverse specialty and payer mix.

• Advanced high-end medical equipment & technology.

• Ability to attract quality doctors, nurses, paramedical & other staff.

• Experienced and qualified professional management team with a strong execution track record

• Track record of stable operating and financial performance and growth.

• Introduction of new specialties at existing hospitals, Radiation therapy for the Oncology Unit & Human Organ Transplant Unit.

• Growing of medical tourism segment to attract more international patients.

Risks:

• Concentrated operations in the Delhi NCR region.

• There is a lot of dependency on doctors, nurses & other healthcare professionals. The majority of the revenue is skewed towards certain specialties. Any impact on these aspects would materially affect the financials of the company.

• The company is subject to various regulations such as environmental, health, safety, operational, reputational, medical & legal claims, regulatory actions, etc. Any medical negligence or claims of malpractice could materially & adversely affect the reputation & prospects.

• Outstanding litigation, any adverse outcome would result in a financial outflow & would also affect the reputation and operations of the company.

• Insurance coverage as a percentage of total assets has not been adequately covered, any damage to the assets would adversely affect the business revenues.

Financial Snapshot:

Conclusion:

India’s population is growing at a fast pace, recently it has become the most populous country by surpassing China. Further, with urbanization reaching 40% by 2030 the demand for beds is only going to rise significantly from here onwards. The Bed density of India is currently just at 15 per 10,000 population indicating the vast under penetration of the healthcare segment.

This vast under penetration coupled with government & private players' efforts for increasing health insurance awareness would likely propel the demand for the Healthcare Industry. Further, medical tourism is another important factor that would aid the industry's growth.

The company’s topline growth has shown decent growth with 30% & 75% for FY23 & FY22 respectively. However, considering other key indicators like the Bed Occupancy rate (45.33%) and ARPOB (Rs. 26,538) is substantially lower than its listed peers. Based on the above parameters company’s earning valuation at 29.7x appears to be on the higher side.

Since the company is operating at a smaller scale and has only 4 branches the growth would soon hit a ceiling. Therefore, in order to grow company needs to have a continuous outflow for capex due to which there would be constant pressure on its bottom line. Once the capex reduces and operating leverage kicks in and the environment would become more suitable then we can have a re-look into the company.

Based on the above factors we would advise our investors to consider subscribing this IPO “only” for potential listing gains.