What you must know about Yatharth Hospital & Trauma Care Services IPO

Yatharth Hospital & Trauma Care Services Ltd was incorporated in the year 2008 as a multi-care hospital chain. It is today ranked among the top 10 largest private sector hospital in the Delhi / NCR region. Yatharth Hospital & Trauma Care Services Ltd currently operates 3 super specialty hospitals situated at Noida, Greater Noida, and Noida Extension sectors of the Delhi / NCR segment. The largest among these is the Noida Extension Hospital with capacity of 450 beds and offering high-end medical and operative care. Yatharth Hospital & Trauma Care Services Ltd also recently acquired a 305-bedded multi-specialty hospital in Orchha, Madhya Pradesh; once again among the largest hospitals in the particular location.

Yatharth Hospital & Trauma Care Services Ltd is supported by a highly competent team of over 370 doctors across various disciplines and specializations. Between them, the healthcare ecosystem of Yatharth Hospital & Trauma Care Services Ltd  offers a wide range of healthcare services across specialties and super specialties. Some of the super specialty centres of excellence include Centre of Medicine, Centre of General Surgery, Centre of Gastroenterology, Centre of Cardiology and Centre of Nephrology & Urology. In addition, the Yatharth Hospital & Trauma Care Services Ltd also offers specialized healthcare services in the areas of Pulmonology, Neurosciences, Paediatrics, Gynaecology, Orthopaedics and Rheumatology. Healthcare has been one of the major focus areas for institutional and private equity investors too in the last few years if you go by the number of deals.

Highlights of the Yatharth Hospital & Trauma Care Services IPO

Yatharth Hospital & Trauma Care Services IPO comprises of a fresh issue and an offer for sale. The price band has been set in the range of ₹285 to ₹300. The issue size assumptions are based on the upper end of the book building price band of ₹300 per share. Here are the major highlights.

• The fresh issue component of the IPO will comprise of 1,63,33,333 shares which at the upper end of the IPO price band at ₹300 per share works out to ₹490 crore. The original size of the fresh issue component was ₹610 crore which was reduced to ₹490 crore after the company successfully completed the pre-IPO placement worth ₹120 crore.
   
• The offer for sale (OFS) component of the IPO will comprise of 65,51,690 shares which at the upper end of the IPO price band at ₹300 per share works out to ₹197 crore. The OFS is being offered by the promoters and the early investors in the company.
   
• Therefore, the overall IPO will comprise of 2,28,85,023 shares which at the upper end of the IPO price band at ₹300 per share works out to ₹687 crore. The final price of the IPO will be discovered through the process of book building, based on subscription levels.

The issue will be managed by IIFL Securities Ltd, Ambit Private Ltd and Intense Fiscal Services Private Ltd. The registrar to the issue is Link Intime India Private Ltd.

Finer points of the Yatharth Hospital IPO application

Yatharth Hospital & Trauma Care Services Ltd was promoted by Manju Tyagi, Neena Tyagi, Vimala Tyagi and Prem Narayan Tyagi. Currently the promoters hold 91.34% of the company, which will get diluted post the IPO. The fresh portion of the IPO will be used for repayment / prepayment of loans taken by Yatharth Hospital & Trauma Care Services Ltd and its subsidiaries and for meeting capex and inorganic growth needs of the company.

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The company has a par value of ₹10 per share and post the IPO, the stock of Yatharth Hospital & Trauma Care Services Ltd will be listed on the NSE and on the BSE. Being a fresh issue of equity, combined with offer for sale, the IPO will result in dilution of equity and EPS, apart from transfer of ownership internally. Here are details of the maximum and minimum allocation across categories.

Let us also look at the minimum lot size in the IPO and what is the minimum and maximum investment limits for various categories of investors. Yatharth Hospital IPO has a lot size of 50 shares, which is the bare minimum shares to be applied for. The table below capture details.

Key dates for Yatharth Hospital & Trauma Care Services IPO and how to apply

The issue opens for subscription on 26th July 2023 and closes for subscription on 28th July 2023 (both days inclusive). The basis of allotment will be finalized on 02nd August 2023 and the refunds will be initiated on 03rd August 2023. In addition, the demat credits are expected to happen on 04th August 2023 and the stock will list on 07th August 2023 on the NSE and the BSE. Yatharth Hospital & Trauma Care Services Ltd will be among the few mainboard IPOs of FY24 and would be crucial in setting the tone for FY24. It is hoped that for the IPO market, the FY24 is able to recreate the IPO magic of FY22. Let us now turn to the more practical issue of how to apply for the IPO of Yatharth Hospital & Trauma Care Services 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 Yatharth Hospital & Trauma Care Services Ltd

The table below captures the key financials of Yatharth Hospital & Trauma Care Services Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Yatharth Hospital & Trauma Care Services Ltd which can be enumerated as under

1. In the last 3 years, the revenues have grown at compounded annual growth rate (CAGR) of 53%. This is an industry where costs are front-ended and revenues take time. The growth in sales is consistent and necessary to be able to sustain long term growth.
    
2. The profit margins and the return on assets have shown a consistent uptick over the last 3 years and that is a good sign that the benefits of fixed cost absorption is happening rapidly for the stock. This shows at the ability of the company to sustain higher valuations.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio. The growth is quite impressive in an industry where investments are largely front-ended.

While pricing of the IPO will matter here, what is more critical is the eventual PAT margins that will sustain. PAT margins are improving and that is the good news. The weighted average EPS of the last 3 years works out to ₹7.77, which is an EPS that can justify the pricing of the IPO. The IPO has been priced so as to leave enough on the table for the investors. The IPO can be considered by investors with a higher risk appetite and willing to wait for the longer term for the dividends of the healthcare sector growth to pan out.