The Tamil Nadu-based Lotus Eye Care Hospital is a state-of-the-art eye care hospital group specialising in super-specialty services related to eye care. It has a network of four eye care hospitals based at Coimbatore (two), and one each at Salem and Tirupur. Lotus has two centres in Coimbatore, one down town and another at the civil aerodrome inaugurated in the year 2002. The Salem centre is located in the heart of the city and it was started in the year 2004. The Tirupur centre started in 2007 is also functioning in a prime location in the city.
The company aims at providing comprehensive eye-care services using world class technology and skills. Besides delivering regular eye-care services, it provides an advanced level of diagnostic and therapeutic services in the field of vitreous and retinal diseases, hacoemulsification surgery for cataract, and customised wave front LASIK laser for glass free vision. Its total bed strength is 120 beds excluding eye camp beds. Its eye care services consist of primary, secondary, and tertiary eye care.
Objects of the issue
Considering the high price band, the company proposes to put up Rs 42 crore. It plans to finance the expansion of its existing facilities, establish new centres, and its working capital requirement. For land, building, and infrastructure spendings, the company plans to use Rs 35 crore. And for purchasing equipment, building staff quarters, and setting up of a primary eye care unit (Rs 3.3 crore), and meeting working requirements, the company intends to utilise Rs 15.35 crore.
Investonomics & valuation
The company derives income from outpatient, daycare, and inpatient hospital services and retail sales in the pharmacy and opticals. During the financial year 2006-2007, it posted a net profit of Rs 1.28 crore. Both on the operational and net profit margin, the company is yet to demonstrate consistency and stabilisation. The company faces stiff competition from other larger players like Shankara Netralaya, Kovai Medical, KG Eye Hospital, Arvind Eye Care and Vasan Eye Care. The Tamil Nadu-based player is looking to expand by setting up three eye care units. Its projects would take another year or two to start functioning. And it is yet to identify land for construction of the hospital at Tirupur, Salem, and Karur and for setting up a primary eye care unit at Bangalore and Chennai.
On the valuation front, considering its nine months data, the company quotes a P/E of around 49(x) and 53(x) respectively at the lower and higher end of the price band respectively. The P/E of LECH is one on the higher side given the fact that bigger players are available at a cheaper P/E. Companies like Apollo Hospitals Enterprise and Kovai Medical Centre & Hospital have a P/E of around 26.77(x) and 12.07(x) respectively. It must be noted that CARE, a rating agency, has assigned an IPO grade “3/5” to this issue. This indicates average fundamentals of the company. Investors need to take into account these facts before investing.