What you must know about Nephro Care India IPO?

About Nephro Care India Ltd

Nephro Care India Ltd was incorporated in the year 2014 in Kolkata to offer comprehensive treatment for kidney-related ailments. This includes medication, exercise, changes in diet, changes in lifestyle, renal insufficiency treatment, etc. Nephro Care is supported by a panel of high-quality doctors and experienced paramedical professionals. As of today, the clinical center provides healthcare services to more than 900 Chronic Kidney Disease patients each month. Their principal facility at Salt Lake in Kolkata covers an area of 5,352 SFT and also has 3 additional satellite clinics located in Kolkata and other parts of West Bengal. Nephro Care India Ltd offers in-house dialysis, outpatient services for nephrology and diabetology, in-house pathology, in-house pharmacy, advanced diagnostics, renal nutrition, home care, home dialysis, and other lifestyle support programs. Nephro Care India Ltd currently employs 110 personnel on its rolls.

Highlights of the Nephro Care India IPO

Here are some of the highlights of the Nephro Care India IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 28th June 2024 and closes for subscription on 2nd July 2024; both days inclusive.
• The stock of the company has a face value of ₹10 per share and it is a book-built issue. The price for the book-building issue is set in the price band of ₹85 to ₹90 per share. Being a book-built issue, the final price will be discovered within this band.
• The IPO of Nephro Care India Ltd has entirely a fresh issue component and no offer for sale (OFS) portion. While the fresh issue portion is EPS dilutive and equity dilutive, the OFS is just a transfer of ownership and hence is not EPS or equity dilutive.
• As part of the fresh issue portion of the IPO, Nephro Care India Ltd will issue a total of 45,84,000 shares (45.84 lakh shares), which at the upper band IPO price of ₹90 per share aggregates to fresh fund-raising of ₹41.26 crore.
• Since there is no offer for sale, the fresh issue will also double up as the total issue size. Hence the overall IPO size will also comprise of the fresh issue of 45,84,000 shares (45.84 lakh shares) which at the upper band IPO price of ₹90 per share will aggregate to overall IPO size of ₹41.26 crore.
• Like every SME IPO, this issue also has a market making portion. The company has set aside a total of 2,30,400 shares as quota for market making inventory. The name of the market maker is yet to be announced. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs.
• The company has been promoted by Dr. Pratim Sengupta. The promoter holding in the company currently stands at 85.02%. However, post the fresh issue of shares, promoter equity holding share will get diluted to 61.38%.
• The fresh issue funds will be used by the company to set up a multi-specialty hospital under the banner of “Vivacity Multi-Specialty Hospital” which will also be focused on Nephro care. A small part of the IPO proceeds has also been set aside for general corporate purposes.
• Corporate Capital Ventures Private Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is yet to be announced by the company.

The IPO of Nephro Care India Ltd will be listed on the SME IPO segment of the NSE.

Nephro Care India IPO – Key Dates

The SME IPO of Nephro Care India Ltd opens on Friday, 28th June 2024 and closes on Tuesday, 2nd July 2024. The Nephro Care India Ltd IPO bid date is from 28th June 2024 at 10.00 AM to 2nd July 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 7.00 PM on the issue closing day, which is 2nd July 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (Applications Supported by Blocked Amount) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on July 4th, 2024, will be visible to investors under the ISIN Code – (INE0SUN01013). This allocation to the demat account is only applicable to the extent of the allocation of shares, and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO Allocation and Minimum Investment Lot Size

Nephro Care India Ltd has announced a market maker allocation of 1,10,400 shares, which will be used as inventory for market making. Share India Securities Ltd has been appointed as the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors, and the HNI / NII investors. The breakdown of the overall IPO of Nephro Care India Ltd in terms of allocation to categories are captured below.

Data Source: Company RHP filed with SEBI

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹1,44,000 (1,600 x ₹90 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹2,88,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There are no upper limits for investments by HNIs / NIIs in the IPO of Nephro Care India Ltd. 

Financial Highlights: Nephro Care India Ltd

Below is the table showing key financial metrics for Nephro Care India Ltd over the past three financial years:

Data Source: Company RHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years; i.e., from FY21 to FY23, being the latest year:

•    The revenues over the last 3 years have growth from a very low base and hence the previous year data cannot really be comparable. Also, the profits have oscillated between profits and losses in the last 3 years. 

•    Net margins are not too relevant in the previous years, but latest year net margins are quite robust. Even latest year ROE and ROA are robust, although the capital base is quite small in this case.

•    The asset turnover ratio or the sweating ratio is relatively strong in the latest year at 2.06X, which is a good sign. It shows deep utilization of assets in this case

The latest EPS of ₹1.94 discounts the IPO price of ₹90 per share at around 46-47 times P/E ratio, which does look high. However, healthcare is a business where investments tend to be front ended and the returns are back-ended. Hence high P/E ratios in the early years are normal. Investors must look at this IPO from a longer term perspective  as a prospective play on the healthcare sector in the Eastern part of India. However, the risks are much higher in this business and that is something the investors have to factor into their calculations. Of course, if the 9-months EPS for FY24 is annualized, then the P/E looks more reasonable at around 20X earnings of FY24. That should give some comfort to the IPO investors.