KIMS IPO Analysis Should you Invest or Not?

Introduction:

KIMS is one of the largest healthcare groups in AP and Telangana. The Krishna Institute of Medical Sciences is an Indian hospital chain based in Andhra Pradesh and Telangana, India. The Subscription window for KIMS IPO is open between 16^th June to 18^th June. Should you subscribe or not, go through this short article.

1. IPO Details:

• The IPO Window for KIMS is open between 16^th June 2021 to 18^th June 2021.
• The Price Band of the IPO ranges between Rs. 815- Rs. 825 per equity share. The Face Value is Rs. 10 per Equity Share.
• The stock will be listed on both the stock exchanges i.e., BSE and NSE.
• An Investor can apply for 18 Shares in 1 lot and hence in multiples thereof up to 13 lots.
• Reservation Category for Investors are as follow: QIBs-75%, NIIs- 15%, and Retail Investors-  10%
• With the Initial Public Offering, Company plans to raise Rs. 2,143.7 crores from the market. IPO consists of fresh issuance of shares worth Rs. 200 Cr. and offer for sale worth Rs. 1,944 crores.
• Objectives of the Issue is that 75% of the money will be used for the repayment of debt of the Company which is Rs. 150 Cr. The rest amount will be used for General Corporate Purposes.
• The IPO will also bring change to the shareholding pattern of the company. Post issue, promoter shareholding will drop to 38.8% from the current 46.8%.

2.  Company Overview:

• KIMS provides multi-disciplinary healthcare services with a key focus on primary, secondary, & tertiary care in tier 2-3 cities.
• The company offers a comprehensive range of healthcare services including oncology, cardiac sciences, neurosciences, gastric sciences, orthopedics, renal sciences, organ transplantation, and mother & child care.
• Currently, the KIMS Group operates 9 hospitals across the states of Andhra Pradesh and Telangana with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of December 31, 2020, which is 2.2 times more beds than the second-largest provider in AP and Telangana, according to the CRISIL report. 
• The KIMS Hospital Group is NABH and NABL certified.
• The healthcare sector is struggling to make profits due to low-margin issues. Various listed hospital chains are incurring losses.
• But the company KIMS is continuously generating profits and it was profitable in the complete FY21. This is because 80% of the hospitals of KIMS are in the mature stage and are generating continuous cash flows.
• The EBITDA margin of the chain is currently at 28%, whereas, the EBITDA margins of matured hospitals are at 31.2%.
• The hospital chain has said that it will expand its operations to the diagnostics and pharmacy business.

3.Financials:

• The Net Sales of the company have grown at 18.4% from Rs. 1,123 Cr. to Rs. 1,330 Cr.
• The finance cost has come down Rs. 39.9 Cr. to Rs. 32.4 Cr. which is 18.8% down from the previous year.
• The other expenses have gone up by 5.8%.
• The EBITDA Margins of the company in FY20 were 22.2% and it has gone up to 28.4% in FY21 which is up by 620 basis points.
• The net profit growth is around 78.5% from 115 Cr. to Rs. 205 Cr.
• The average revenue per operating bed has gone up by 12.6% from Rs. 18,000 to Rs. 20,600. Whereas, the bed occupancy rate has come down by 2.4% from 80.5% to 78.6%.
• The operating costs of the hospital are less because 80% of the doctors hold some portion of the equity in the company.
• The ROCE of the company is at 27.5% which has increased from 14.5% in the last 3 years.
• As of now, the P/E ratio stands at 26x.

Conclusion:

There are questions raised on the governance of the corporate due to some insider transactions before the IPO. But looking at a long-term horizon, the company is looking very positive with very good fundamentals and growth numbers. Investors for listing gains, there is a piece of good news available for them as 9%-10% Grey Market Premium is available as of now. Do proper research and study before investing or consult financial advisors before making any investment decisions.