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Yatharth Hospital

By Geetanjali Kedia
about 1 year ago

IPO Size: Rs. 687 cr

  • Fresh issue worth Rs. 490 cr, for debt repayment (Rs. 245 cr), capex (Rs. 132 cr), future acquisitions (Rs. 65 cr)
  • Offer For Sale (OFS) worth Rs. 197 cr by the promoter (91% to drop to 66%)

Price band: Rs. 285-300 per share

  • Rs. 120 cr pre-IPO undertaken at Rs. 300 per share on 6th Jul 2023.

M cap: Rs. 2,576 cr, implying 27% dilution

IPO Date: Wed 26th Jul to Fri 28th Jul 2023, Listing Mon 7th Aug 2023

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

 

North Indian Hospital Chain

Yatharth Hospital runs 4 super speciality hospitals in North India (Noida, Greater Noida, Noida Extension and Jhansi) having 1,405 bed capacity and 1,185 operational beds. Since FY19, Yatharth’s operational bed capacity has increased at 25% CAGR, while revenue rose at 50% CAGR. FY23 revenue stood at Rs. 520 cr, with nil covid revenue.

 

Lower Bed Occupancy

FY23 bed occupancy was low at 45% - lowest among listed hospital chains with 55-75% occupancy. This was due to 8% occupancy at newly-acquired 305-bed Jhansi hospital (acquired on 10th Apr 2022, non-operational between FY20-22). Excluding Jhansi, company’s bed occupancy was at 55%, with 250-bed Noida hospital at 88% occupancy and 400-bed Greater Noida at 62%. While overall occupancy has inched up from 36% in FY20, gradual ramp-up and increasing international in-patient volume for medical tourism can improve occupancy rates further. Staff attrition however is very high (46% for resident doctors, 74% for nurses) which is partly an industry challenge and more so for Yatharth.

 

Healthy Business Matrix

Despite low occupancy, EBITDA margin is healthy at 26% as Yatharth enjoys one of the lowest consumables cost at 18% (22% for KIMS, 23% Global Health (Medanta), 22% for Narayana, 25% for HCG). Another key metric in hospital business, Average Revenue per Operating Bed (ARPOB), stands at Rs. 26,538 per day, up 13% YoY in FY23. Company’s PAT stood at Rs. 66 cr in FY23, leading to 12.6% net margin and EPS of Rs. 10, on present equity of Rs. 70 cr (FV Rs. 10 each).  

 

Priced Much Lower than Peers

Shares are being offered at FY23 historic PE multiple of 30x and EV/bed of Rs. 1.7 cr, which is at a significant discount to peers:

  • Telangana headquartered 3,468-bed KIMS’ clocks 28% EBITDA, with comparable ARPOB of Rs. 29,946 per day, is ruling at a historic PE multiple of 47x and EV/bed of Rs.4.5 cr.
  • 2,700-bedded Global Health (Medanta) has higher ARPOB, but lower EBITDA of 23% yet ruling at a PE of 59x and EV/bed of about Rs. 7 cr.  
  • Narayana Hrudayalaya with ARPOB of Rs. 34,800 and 48% occupancy is trading at 36x PE and EV/bed of Rs. 3.4 cr
  • HCG, with 1,415 beds, 60% occupancy, 17% EBITDA margin, RoE of only 3%, is ruling at a PE multiple of 110x.   

 

Affordable Healthcare Stock

Present net debt is at Rs. 225 cr and post IPO, company will become net debt free. Factoring in lower interest cost (Rs. 21 cr in FY23) and increased operational efficiency, FY24E EPS is estimated at about Rs. 11.7, discounting the IPO price by a at current year PE multiple of 25x, which is seen attractive, for the bed capacity, likely growth and FY23’s 36% RoE. Even taking into account the lower occupancy vis-à-vis peers, PE multiple has room to expand by atleast 25-30%, making the IPO pricing extremely attractive.