IPO Size: Rs. 2,498 cr, Entirely Offer for Sale (OFS)

• 35% by the promoters (70% to drop to 64% post IPO)
• 20% by the senior management (7% to shrink to 4%)
• Balance by individual shareholders (to reduce 5% combined holding to ~1%)

Price band: Rs. 1,265-1,329 per share

M cap: Rs. 22,802 cr, implying 11% dilution

• Only 10% retail, as cash and equivalents account for over 50% of net worth in FY22 and FY23

IPO Date: Thu 12^th Dec to Mon 16^th Dec 2024, Listing Thu 19^th Dec 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Service Provider to US Health Clinics

Inventurus Knowledge Solutions (IKS), established in 2006 and co-promoted by RJ-family, provides technology solutions to US physicians, with an employee base of 13,500. It operates in the large and fast-growing US healthcare industry, valued at USD 4.8 trillion and growing 8% annually, sans cyclicity (unlike software companies). IKS serves US physician clinics / enterprises, unlike recently listed Sagility catering to health insurance companies.

Inorganic Growth

On 27^th Oct 2023, IKS acquired peer Aquity Holdings for USD 220 million (approximately Rs. 1,800 cr), funded via Rs. 1,200 cr debt and balance through internal accruals. Both IKS and Aquity clock annual topline of Rs. 1,200-1,300 cr, but latter’s EBITDA margin is lower than IKS’ 38% (pre-acquisition). Going forward, 30% EBITDA is guided, factoring in the large cross-sell opportunity and operating leverage.

High Margin Business

IKS generates revenue in USD and significant expenses are incurred in INR. Currency arbitrage along with technology platform lead to strong margins of 30% at EBITDA level, as well as a healthy RoE of 30% (unlike peer Sagility).

Company’s FY24 revenue, which includes 5 months of Aquity, rose 76% YoY to Rs. 1,818 cr, clocking 30% EBITDA margin, 20% net margin and 32% RoE.

Acquisition doubled H1FY24 revenue YoY to Rs.1,283 cr, with EBITDA up 55% YoY. Even sequentially, revenue rose 8% from Rs. 1,187 cr in H2FY24, whereas EBITDA jumped 24% sequentially from Rs. 288 cr in H2FY24 to Rs. 359 cr in H1FY25, expanding EBITDA margin from 24% to 28% respectively.

Debt-Free by FY26E-end

Most of the operating profit gains were offset by Rs. 48 cr interest outgo, on the leveraged buy-out, keeping H1FY25 PAT flat YoY at Rs. 209 cr. PAT however rose 26% sequentially, from Rs. 165 cr in H2FY24. EPS stood at Rs. 12 and Rs. 22 for H1FY25 and FY24 respectively.

In past 12 months, debt has reduced by a third to Rs. 800 cr, which is guided to be repaid entirely over the next 15 months, from the expected cash generation. Thus, H2FY25E and FY26E bottomline growth may be slower than operating profit growth, but thereafter, EPS outlook is bright.

Peer Comparison

Based on FY26E EBITDA of close to Rs. 900 cr and PAT of approximately Rs. 550 cr, shares are offered at an EV/EBITDA multiple of 26x and a PE of 41x, on a one-year forward basis.

Closest peer Sagility’s margins are smaller (14% net, against 18-20% for IKH) as also return ratio lower (11% RoE vis-à-vis 30% for IKS) is ruling at FY26E EV/EBITDA of 15x and PE of 30x. Thus, on peer comparison, IKS’ IPO is fairly priced.

Pre-IPO Secondary Sale  

In early Dec 2024, promoters and selling shareholders sold 5.2% equity at Rs. 1,329 per share for approximately Rs. 1,200 cr, to institutional investors. Including the 11% dilution in the IPO, post-listing public float will be low at 16%. Of this, non-institutional public float will be barely 2.7%, holding company valuations at a premium.