HealthCare Global IPO hits markets; 10 things to know before investing

By: | Updated: March 17, 2016 4:13 PM

HealthCare Global Enterprises has raised Rs 292 crore through issue of shares to 11 anchor investors, including International Finance Corporation.

HealthCare Global Enterprises IPO on March 16HealthCare Global Enterprises has fixed a price band of Rs 205-218 for its initial public offerings (IPO).

HealthCare Global Enterprises initial public offerings (IPO) hit the capital markets on Wednesday. The company has fixed a price band of Rs 205-218 for its IPO. The issue will close on March 18. The company got the Securities and Exchange Board of India, or Sebi, nod in November 2015.

On day 2 till 3 pm, the IPO was subscribed 0.25 times, according to NSE data. The IPO was subscribed 21 per cent on the first day of the issue today. The Rs 650-crore issue received bids for 34,19,715 shares against the total issue size of 1,63,90,000 shares, data available with the NSE till 1700 hrs showed.

Ahead of its IPO, the cancer-care network operator raised Rs 292 crore through issue of shares to 11 anchor investors, including International Finance Corporation on Tuesday.

HealthCare Global Enterprises has allotted 1,34,10,000 equity shares at Rs 218 per share aggregating to Rs 292.34 crore to 11 anchor investors, the company said.

Below are 10 things you should know about HealthCare Global Enterprises (HCG) and its public offer before subscribing.

About the company: HCG is a specialty healthcare provider focused on cancer and fertility. Under the HCG brand, the company operates the largest cancer care network in India. Under the Milann brand, the company operates fertility centres. The HCG network consists of 14 comprehensive cancer centres, including its Centre of Excellence in Bengaluru, 3 freestanding diagnostic centres and 1 day-care chemotherapy centre, across India. The HCG network operates through a “hub and spoke” model where the HCG Centre of Excellence in Bengaluru serves as a hub to the other cancer centres. The company has four Milann fertility centres in Bengaluru.

Promoters: The company is promoted by a group of medical practitioners including Dr BS Ajai Kumar, Dr KS Gopinath, Dr Ganesh Nayak, Dr M Gopichand and Dr BS Ramesh who come from different fields of specialisation.

About the offer: The IPO comprises fresh issue of up to 1.16 crore equity shares and an offer for sale of up to 1.82 crore shares by its existing shareholders. The offer, which closes on March 18, would constitute up to 35.03 per cent of the company’s post-offer paid-up equity share capital.

Lead Managers: Kotak Mahindra Capital Company, Edelweiss Financial Services, Goldman Sachs (India) Securities, IDFC Securities, IIFL Holdings and Yes Bank are the book running lead managers to the issue while Karvy Computershare is the offer’s registrar.

Financials: For the financial year ended March 2015, the company posted a consolidated net profit of Rs 0.54 crore against net loss of Rs 35.55 crore a year ago. HCG registered net loss of Rs 10.51 crore and Rs 3.33 crore in FY13 and FY12, respectively. The company’s topline grew 15.13 per cent year-on-year to Rs 524.19 crore for the year financial year ended March 2015. It posted revenue of Rs 455.3 crore and 340.68 crore in FY14 and FY13, respectively.

Objective of the offer: The proceeds of the issue will be used towards purchase of medical equipments, investment in IT software, services and hardware, prepayment of debt of around Rs 147 crore and other general corporate purposes.

Strengths: HCG network is one of the largest provider of cancer care in India in terms of the total number of private cancer treatment centres. HCG’s specialist physicians adopt an integrated multidisciplinary and technology focused approach to provide comprehensive cancer care to its patients. Fertility treatment is an emerging segment of Indian healthcare industry and is currently relatively underdeveloped and fragmented. As of December 31, 2015, the company had a team of 400 specialist physicians including 219 oncologists, 23 radiologists, 16 pathologists and 142 other specialist physicians in its HCG network. As of December 31, 2015, it also had 27 fertility specialists, 18 of whom were pursuing their post-graduate fellowships at its Milann fertility centres, and 22 other specialist physicians in its Milann network. The company believes this model allows its network of cancer centres to effectively leverage the expertise and capabilities.

Risks: The company’s success depends on its ability to maintain and expand its HCG network. Also a significant portion of its revenue comes from its centre of excellence in Bengaluru. It also relies on third party suppliers and manufacturers and the company have experienced negative cash flows in the prior years are some of the key risks, according to SMC Investment and Advisors.

Valuation: According to Sharekhan, at the price band of Rs 205-218 per share, the issue is priced at 26.6-28.0x EV/EBIDTA for FY2015.

Should you subscribe: According to SMC, the company’s operations have been growing on top lines, but bottom line were in negative. However, its model of cancer and fertility treatment under HCG and Milann brands are expected to generate positive earnings going forward. Moreover, the issue is offer for sale, the amount raised would go to the selling shareholders and on the valuation front, the issue looks pricey. An investor who has high risk appetite can opt the issue.

ICICIdirect.com in a research note said, “At the IPO price band of Rs 205-218, the stock is available at 3.6-3.8x of FY15 sales of Rs 519.4 crore. The asking price is in sync with recent deals in the healthcare segment. We recommend that investors ‘Subscribe’ to the issue as it is a sustainable business model with good visibility.”

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