A healthy issue! Brokerage firms remain positive on Global Health's IPO

The Rs 2,206 crore initial public offering (IPO) of Global Health (GHL) will open for subscription on Thursday, November 3, 2022. The company has decided to sell its shares in the range of Rs 319-336 apiece.

Many brokerages remain positive on the issue and suggest subscribing to it, citing decent valuations, growth prospects and robust business model. However, higher expenses are a major risk for the company, they said.

Global Health operates and manages hospitals under the Medanta brand and the issue is open for subscription till November 7, 2022. Investors can bid for a minimum of 44 equity shares and in multiples thereof.

Despite the challenging environment, the company has leveraged its large-scale hospitals with world-class infrastructure, high-end medical equipment and technology to record decent operational and financial performance, said Reliance Securities.

It has recommended subscribing to the issue in the view of strong clinical expertise, focus on clinical research and academics, focus on under-served areas with dense population, presence in top capital cities of large states, decent brand equity, experienced management team and valuation comfort.

The IPO consists of a fresh issue of equity shares aggregating to Rs 500 crore and an offer for sale (OFS) of up to 5.08 crore equity shares by its promoters and existing shareholders.

As a part of the OFS, Anant Investments, an affiliate of private equity major Carlyle Group and Sunil Sachdeva (jointly with Suman Sachdeva), will offload equity shares.

The net proceeds from the fresh issue will be utilized towards repayment or prepayment of borrowings, in full or part, of the subsidiaries, GHPPL and MHPL and general corporate purposes.

At the higher price band, Global Health demands an EV/Sales multiple of 4 times, which is lower than the peer average, said Choice Broking.

“Considering the strong long-term structural factors and the anticipated business growth of the company we assign a 'subscribe' rating for the issue,” it said in its IPO note.

Founded by Naresh Trehan, a renowned cardiovascular and cardiothoracic surgeon, Global Health is a leading private multi-speciality tertiary care provider in the north and east regions of India.

Backed by private equity investors such as Carlyle Group and Temasek, Global Health operates a network of five hospitals under the 'Medanta' brand in Gurugram, Indore, Ranchi, Lucknow and Patna, with one hospital under construction in Noida.

The valuations are in line with its peers like Narayana Hrudayalaya, Max Healthcare and Apollo Hospitals. It has better revenue and PAT growth over two years, but weaker return on equity faces near-term headwinds, said Angel One.

Citing concerns like high dependence on third-party suppliers, highly competitive industry and worsening economic conditions, which may slow the business, the brokerage has a neutral view on the issue.

The company has reserved 50% of shares for qualified institutional buyers, 15% for non-institutional investors and 35% of shares for retail bidders.

For the year 2021-22, the company reported a profit after tax (PAT) of Rs 196.2 crore with a revenue of Rs Rs 2,205.82 crore. Its PAT stood at Rs 58.71 crore with total revenue of Rs 626.54 crore for the period ended on June 30, 2022.

Kotak Mahindra Capital Company, Credit Suisse Securities (India), Jefferies India and JM Financial are the book-running lead managers to the IPO, whereas KFin Technologies is the registrar to the issue.

The company has been looking for value-accretive opportunities while strengthening its presence in key growth markets, said Religare Broking. "We believe the IPO is available at a better valuation and investors can subscribe to the issue," it said.

"It plans to invest in bed capacity expansion, enhance technology, train healthcare professionals as well as focus on preventive healthcare," the brokerage added.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)