What you must know about GPT Healthcare IPO?

GPT Healthcare Ltd – About the company

GPT Healthcare Ltd was incorporated in the year 1989 to operate a chain of mid-sized, multi-specialty, full-service hospitals in Eastern India. These hospitals are operated under the ILS Hospitals brand. They provide integrated healthcare services focusing on secondary and tertiary care. GPT Healthcare Ltd is based out of Kolkata and it offers a full gamut of healthcare services across 35 specialties and super-specialties. These include internal medicine, diabetology, nephrology, laparoscopic surgery, general surgery, gynaecology, obstetrics, gastroenterology, orthopaedics, interventional cardiology, neurosurgery, paediatrics, and neonatology. In addition, GPT Healthcare Ltd  also offers integrated diagnostic services and pharmacies. As of date, GPT Healthcare Ltd has a total of 1,855 employees, 85 full-time consultants and 465 visiting consultants.

Currently, GPT Healthcare Ltd operates 4 multi-disciplinary hospitals with a combined capacity of 561 beds. Its offerings are spread across the full spectrum of healthcare services and cover more than 35 specialities and super specialities. The first such facility is the Salt Lake facility in Kolkata, with a capacity of 85 beds. Out of these 85 beds, a total of 17 beds are in various intensive care units (ICUs) and high dependency units (HDUs). The second facility located at Dum Dum in Kolkata with a capacity of 155 beds. Out of these 53 beds are in various ICUs and HDUs. The third facility is located at Howrah, West Bengal, with a capacity of 116 beds of which 43 beds are in various ICUs and HDUs. Finally, there is the one hospital in the portfolio of GPT Healthcare Ltd in the Northeast, which is located at Agartala (Tripura). This hospital has a capacity of 205 beds out of which 66 beds are in various ICUs and HDUs.

The fresh funds will be used to repay / prepay some of the high-cost borrowings of the business. Promoters currently hold 67.34% in the company, which will get diluted post the IPO to 65.58%. The IPO will be lead managed by JM Financial, while Link Intime India Private Ltd will be the registrar to the IPO.

Highlights of the GPT Healthcare IPO Issue

Here are some of the key highlights to the public issue of GPT Healthcare IPO.

• GPT Healthcare IPO will be open from 22nd February, 2024 to 26th February, 2024; both days inclusive. The stock of GPT Healthcare Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹177 to ₹186 per share.
   
• GPT Healthcare IPO will be a combination of a fresh issue of shares and offer for sale (OFS) component. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership.
   
• The fresh issue portion of the IPO of GPT Healthcare Ltd comprises the issue of 21,50,537 shares (21.51 lakh shares approximately), which at the upper price band of ₹186 per share will translate into a fresh issue size of ₹40 crore.
   
• The offer for sale (OFS) portion of the IPO of GPT Healthcare Ltd comprises the sale of 2,60,82,786 shares (260.83 lakh shares approximately), which at the upper price band of ₹186 per share will translate into an OFS size of ₹485.14 crore.
   
• Out of the OFS size of 2,60,82,786 shares, the investor shareholder(Banyan Tree Growth Capital LLC) will offer the entire lot of shares worth Rs485.14. Promoter shareholders will not be offering any shares in the offer for sale (OFS).
   
• Thus, the total IPO of GPT Healthcare Ltd will comprise of a fresh issue and an OFS of 2,82,33,323 shares (282.33 lakh shares approximately) which at the upper end of the price band of ₹186 per share aggregates to total issue size of ₹525.14 crore.

The IPO of GPT Healthcare Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor allocation quota

On February 21st, 2024, GPT Healthcare IPO's anchor issue witnessed strong participation, with anchors subscribing to 30% of the total IPO size. Out of 282.33 lakh shares available, anchors acquired 84.70 lakh shares at the upper price band of ₹186 per share, comprising a face value of ₹10 and a premium of ₹176. The anchor placement report was submitted to the BSE on February 21st, preceding the IPO's opening on February 22nd, 2024.

It may be noted here that the Net Offer above refers to the quantity net of employee and promoter quota, as indicated above. There is no employee quota that has been communicated by the company as of now in the RHP. The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately.

Lot sizes for investing in the GPT Healthcare IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of GPT Healthcare Ltd, the minimum lot size is 80 shares with upper band indicative value of ₹14,880. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of GPT Healthcare Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for GPT Healthcare IPO and how to apply?

The issue opens for subscription on 22nd February 2024 and closes for subscription on 26th February 2024 (both days inclusive). The basis of allotment will be finalized on 27th February 2024 and the refunds will be initiated on 28th February 2024. In addition, the demat credits are expected to also happen on 28th February 2024 and the stock will list on 29th February 2024 on the NSE and the BSE. GPT Healthcare Ltd will test the appetite for such healthcare stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 28th February 2024 under ISIN (INE486R01017). Let us now turn to the practical issue of how to apply for the IPO of GPT Healthcare Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of GPT Healthcare Ltd

The table below captures the key financials of GPT Healthcare Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of GPT Healthcare Ltd which can be enumerated as under

1. In the last 2 years, revenue growth has been robust with the sales growing nearly 50% in the last 2 years. Hence it makes the latest year numbers the most credible from a projection perspective. This is also true about net profits.
    
2. The net profits have flattened out in the in the latest year (FY23). This also led to the net margin turning tapering in FY23 to 10.80%. However, the ROE at 23.59% and the ROA at 11.94% continue to be very robust.
    
3. The company has a high sweating of assets of above 1.0X on average in the 3 years. The robust asset turnover also gets compounded by the high ROA which magnifies the already robust sweating ratio. That is something investors have to factor in.

Let us turn to the valuations part. On the latest year diluted EPS of ₹4.88, the upper band stock price of Rs186 gets discounted at a P/E ratio of 38.11 times. However, this sort of high P/E ratios are normal in the healthcare industry in the growth phase. Net margins and ROE will be the key going ahead.

Here are some qualitative advantages that GPT Healthcare Ltd brings to the table.

• GPT has a very key presence int eh regional healthcare space and a very strong foothold in the East and Northeast region, where demand is high, but is underserved.
   
• It has what is key to any healthcare outfit, the perennial supply of high quality of healthcare professionals, consultants, and doctors.
   
• It has a track record of running the complicate healthcare business profitably, as it has ably demonstrated in the last few years.

The nature of the healthcare business is one of higher risk in the initial phase and lower risk in later phases, once the roll out is completed and growth has matured or stabilized. GPT Healthcare Ltd is yet to reach that maturing stage. That is what the investors can bet on in the IPO. However, investors in the IPO must be prepared for higher levels of risk, the possibility of cyclical returns and a longer holding period; apart from low returns on capital for a long time.