Wockhardt
Wockhardt Hospitals is entering the capital market on 31st January, 2008 with a public issue of 2.51 crore equity shares of Rs.10 each, with the revised price band of Rs.225 to Rs.260 per share.
Free pricing regime seems to mean issuing shares to promoters at par, or maybe, even at a discount while issuing to the public, 26 times of its face value. The company had issued 50 lakh shares of Rs.10 each, at par, on 11th June 2007, to the Chairman of the company Khorikawala. To add sweetener to this, bonus of 35% was issued on 3rd July, 2007. See, how generous, the companies are towards its promoters. This has led the paid-up equity of the company to rise to Rs.80 crores.
Presently, the company has 15 hospitals in operations, with 1,374 beds, of which, 341 are ICU beds. Of these, 10 are super speciality hospitals while five are regional speciality intensive care unit hospitals. All these were created by the company, with highly leveraging its balance sheet. As at 31-12-07, the net worth of the company was at Rs.84 crores, with paid-up equity of Rs.74 crores and reserves of Rs.10 crores. As against this, total debt of the company were at Rs.437 crores, translating into a debt equity ratio of 5.20 : 1.
Inspite of the company's hospital in operations, since 2002, financial performance is yet to catch on, especially on the bottomlines. Mumbai Hospital with 191 beds started in July 2002, while Bangalore Hospital with 92 beds started in 1991. FY 07 financial performance has been nothing great with total income at Rs.237 crores, PBT of Rs.16.18 crores and PAT of Rs.15.59 crores. For 9 months ending 31-12-07 total income was at Rs.260 corres with PBT of Rs.16.32 crores and PAT of Rs.7.31 crores. Thanks to Deferred Tax of Rs.6.55 crores, which has reduced the bottomline.
The company is now setting up 10 hospitals with an estimated outlay of Rs.636 crores, of which Rs.569 crores is being sourced from the proposed IPO. The total plan of the company is to set up 17 hospital with 3,419 beds. Rs.285 crores is being mobilized to liquidate the debt of the company, maybe to bring it on better financial parameters.
At the upper band, the company intends to mobilize about Rs.650 crores, of Rs.260 per share, by diluting 24.06% stake. This values the company at around Rs.2,700 crores excluding net debt of Rs.150 crores. Apollo Hospital with annual revenue of over Rs.1,000 crores and PAT of Rs.80 crores is valued at about Rs.2,300 crores, while expected EPS for FY 08 is close to Rs.20. This stock is ruling at a PE multiple of close to 22 on historic earning. Similarly, Fortis Health Care has a market capitalization of Rs.1,800 crores while adding debt thereto of Rs.600 crores, it works out at Rs.2,400 crores. Even Fortis has an annual topline of Rs.500 crores, though the company has yet to post its bottomline in black.
If established profit making company like Apollo Hospitals or company from Ranbaxy stable with promoters' stake of 75% is available at much cheaper valuations, why to go for this issue, which is definitely very expensive. Afterall, one can't pay such a steep price for having Wockhardt tag. So, even at the revised price band of Rs.260 (at the upper end) is expensive, while one may consider subscribing it at Rs.225 per share, at the lower end of the revised band.