IPO Size: Rs. 869 cr

• Fresh issue worth Rs. 542 cr, for debt repayment of Rs. 510 cr, to become debt-free
• Offer For Sale (OFS) worth Rs. 327 cr – half by the promoter (50% stake to drop to 41%) and half by other individual shareholders.

Price band: Rs. 695-735 per share

• Rs.123 cr pre-IPO placement undertaken at Rs. 735 per share on 19^th Aug 2023

M cap: Rs. 4,819 cr, implying 18% dilution

IPO Date: Wed 6^th Sep to Fri 8^th Sep 2023, Listing Mon 18^th Sep 2023

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

Multi-Specialty Hospital Chain in West India

Jupiter Life Line Hospitals is a chain of 3 hospitals in Thane, Pune and Indore, having a total capacity of 1,200 beds and 961 operational beds, under ‘Jupiter’ brand, promoted by Dr. Ajay and Dr. Ankit Thakker. Company’s attrition rate of just 2% for doctors and 28% for nurses in FY23, which is one of the lowest in the industry.

40% Capacity Hike Underway

Company is constructing a 500-bed quaternary care greenfield hospital in Dombivli, Maharashtra with an approximately Rs. 500 cr investment on land owned by it. Capex per bed of Rs. 1 cr is seen on the higher side, compared to about Rs. 60 lakh for Rainbow, Rs. 42 lakh for Narayana and Rs. 31 lakh for Yatharth. This capex is being funded via internal accruals, with operations commencing in phases, in the next 2-3 years. Over the longer term, company guides for total capacity of 2,500 beds.

Financials to Strengthen

Jupiter’s Average Revenue per Operating Bed (ARPOB) of Rs. 50,990 is among the highest among similar sized listed peers (Yatharth Rs. 26,500, KIMS Rs. 30,000, Narayan Rs. 34,800, Rainbow Rs. 49,000). With a 63% bed occupancy in FY23, revenue stood at Rs. 893 cr revenue. However, EBITDA margin of 24% for FY23 is on the lower side (36% for Rainbow, 28% KIMS, 26% Yatharth). Indore hospital, started in Jan 2020, recorded occupancy of just 40% in FY23, accounting for 12% of Jupiter’s revenue.

Going forward, once this 231 bed hospital matures, overall company margins can improve. Also, after entire debt is repaid from fresh issue proceeds, Rs. 42 cr annual interest expense will straight get added to the bottomline, from H2FY24 onwards. This leads to FY24E EBITDA of nearly Rs. 254 cr (from Rs. 212 cr in FY23) and FY24E PAT of Rs. 150 cr, translating into an EPS of close to Rs.24   

Attractive Valuation

On FY24E EPS of Rs. 24, shares are priced at PE multiple of less than 31x, for current year estimates, lower than most other hospital chains, such as KIMS (43x), Rainbow (42x), recently listed Yatharth (32x). Even accounting for Jupiter’s lower RoE of 20%, due to asset-heavy only-hub strategy (vis-à-vis 22-26% for peers), which will reduce further in FY24e, due to IPO dilution, shares are priced at a reasonable discount to its peers.

Only bother is promoter holding will be low, at just 41%, post IPO. But this is not an industry one-off, as KIMS promoter holding also stands at less than 39%.