KIMS Hospitals IPO opens on Wednesday; should you subscribe?

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The Rs 2,144-crore initial public offering (IPO) of Krishna Institute of Medical Sciences (KIMS Hospitals) will open for bidding tomorrow, June 16.

The hospital chain has fixed a price band of Rs 815-825 per share. The public issue will close for subscription on Friday, June 18, 2021. Investors can bid for a minimum of 18 equity shares and in multiples, thereafter, translating to a minimum investment of Rs 14,850. A retail investor can at maximum apply for 13 lots or 234 shares for 1,93,050. Up to 75% of the total issue size has been reserved for qualified institutional buyers, 15% for non-institutional investors, and 10% for retail investors.

The IPO comprises a fresh issue of Rs 200 crore and an offer for sale of up to 2,35,60,538 equity shares. The offer for sale consists of up to 1,60,03,615 equity shares by investor General Atlantic Singapore KH Pte Ltd; 3,87,966 equity shares by Dr Bhaskara Rao Bollineni; 7,75,933 equity shares by Rajyasri Bollineni; 3,87,966 equity shares by Bolllineni Ramanaiah Memorial Hospital; and 60,05,058 shares by other selling shareholders.

The net proceeds from the fresh issue will be utilised for repayment of certain borrowings (Rs 150 crore) availed by the company and its subsidiaries viz KHKPL, SIMSPL and KHEPL; and general corporate purposes.

Grey market chatter

In the grey market, KIMS shares were trading at Rs 895 marking a premium of Rs 70 or 8% over the IPO price on Tuesday.

“The company has delivered a capable performance in the last couple of years. There has been a healthy growth in both EBITDA (earnings before interest tax depreciation and amortisation) and margins. The company reported a 48% CAGR (compounded annual growth rate) in EBITDA and the EBITDA margins grew from 18.83% to 28.43% from FY19-FY21. The bed occupancy ratio is healthy around 80%. They have retained over 80% of doctors since its inception,” said explained grey market tracker Abhay Doshi, Founder of Unlisted Arena.

The issue looks fairly priced given its strong performance and prospects. The IPO should attract interest from long-term investors, added Doshi.

Should you subscribe?

KIMS provides multi-disciplinary integrated healthcare services enjoying a commanding position in AP and Telangana. So, the key question whether you should subscribe to IPO or not. Here what the brokerages have to say

Anand Rathi | Subscribe

At the upper end of the IPO price band, Krishna Institute of Medical Sciences is offered at 32.2x its FY21 earnings, with a market cap of Rs 6,601.4 crore.

Given the company’s dominant position in the region of Andhra Pradesh and Telangana, diversified revenue across specialities, growth prospects, strong balance sheet along with high RoNW (return on net worth) of 23.30% in FY21.

Marwari Shares & Finance | Subscribe

Considering FY 21 adjusted EPS (earnings per share) of Rs 25.68 on a post-issue basis, the company is going to list at PE of 32.13x with a market cap of Rs 6,601.4 crore whereas its peers namely Apollo Hospitals is trading at PE (price to earnings) of 238. The company is one of the largest corporate healthcare service providers in AP and Telangana and is available at a reasonable valuation compared to its peers.

Angel Broking | Subscribe

The company has a very healthy balance sheet with negative Net Debt/ Equity. We believe that the upcoming expansion plan in Bangalore & Chennai can be funded through internal accruals and a minimum amount of debt.

FY-2021 PE (price to earnings) ratio of 31.2x and EV (enterprise value)/EBITDA (earnings before interest tax depreciation & amortization) of 17.8x, at the upper end of the IPO price band is slightly better than the peer companies. Similarly, the company has one of the best ROE ( return on equity) & ROCE (return on capital employed) of 23.8% and 24.8% respectively.

Primary market expert Dilip Davda | Subscribe for long term

Witnessing fancy for health care segment following global pandemic and the likely trends of changing lifestyle with health consciousness and spending for the same. This company has ultra-modern equipment and has been posting growth in its top and bottom lines.

FY21 earnings on post-issue fully diluted equity, then the asking price is at a P/E of around 32.13. The issue is fully priced in terms of P/E in comparison with listed peers that are trading at a negative P/E.

IPO timeline

The issue is likely to finalize the basis of allotment by June 23, and the initialization of funds will take place by June 24. While the credit of equity shares to depository accounts of allottee on June 25. The hospital chain is expected to make its stock market debut on June 28, 2021.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)