GPT Healthcare IPO - Investment Rationale, Issue Details; Financials, Strengths, Risks And More: Anand Rathi

Anand Rathi's IPO Report

GPT Healthcare Ltd. is launching its initial public offering today and the offer will close for subscription on Feb. 26.

The Rs 525 crore IPO comprises of a fresh issue of Rs 40 crore and an offer for sale of 2.61 crore shares, which would be around Rs 485 crore.

The company has fixed a price band in the range of Rs 177 to Rs 186 per share, with a minimum application lot size of 80 shares.

Objects of the Issue

• Repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company from banks and financial institutions.

• General corporate purposes.

About the company

GPT Healthcare Ltd (ILS Hospitals) is one of the key regional corporate healthcare companies in Eastern India in terms of number of beds and hospitals as of Fiscal Year 2023.

The company operates a chain of mid-sized full-service hospitals under the brand and provides integrated healthcare services, with a focus on secondary and tertiary care.

As of September 2023, they operate four multispecialty hospitals in Dum Dum, Salt Lake and Howrah in West Bengal and Agartala in Tripura with a total capacity of 561 beds.

Strengths

• Key regional corporate healthcare company with a strong foothold in under-penetrated and densely populated healthcare delivery markets.

• ‘Right-sized’, full service and strategically located hospitals leading to high return on capital.

• Well diversified specialty mix and location mix.

• Investment in infrastructure, processes and clinical excellence driving affordability, and a strong value proposition for stakeholders.

• Ability to attract, train and retain quality medical professionals.

Outlook

GPT Healthcare operates a chain of mid-sized full-service hospitals under the same brand and provides integrated healthcare services, with a focus on secondary and tertiary care. Going ahead, the company intends to strengthen its existing hospitals by further balancing specialty mix, deepening its expertise in selective specialties and adding new specialties and services.

At the upper price band company is valuing at price/earning of 39.1 times with a market cap of Rs 15,262 million post issue of equity shares and return on net worth of 23.7% in FY23.

On the valuation front, we believe that the company is fairly priced. Thus, we recommend an “Subscribe – Long Term” rating to the IPO.

Key risks

• GPT Healthcare faces competition from listed industry peers, which could impact its market share and profitability.

• The healthcare sector is subject to regulatory changes and compliance requirements, posing potential risks to operations.

• The company’s reliance on borrowings exposes it to interest rate risks and financial leverage.

• Lack of health insurance in India may adversely affect business, cash flows, financial condition and results of operations.

• In the past company entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with the equity shareholders.

• The company outsource some of service functions to third-party contractors. Any lapse by such third-party service providers may have adverse consequences on business and reputation.

• The company do not receive payments on time from patients, financial condition, cash flows and results of operations may be materially and adversely affected.

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