Global Health coming with an IPO to raise upto Rs 2232 crore

Global Health

• Global Health is coming out with a 100% book building; initial public offering (IPO) of 6,64,34,981 shares of Rs 2 each in a price band Rs 319-336 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on November 3, 2022 and will close on November 7, 2022.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 159.50 times of its face value on the lower side and 168.00 times on the higher side.
• Book running lead managers to the issue are Kotak Mahindra Capital Company, Credit Suisse Securities (India), Jefferies India and JM Financial.
• Compliance Officer for the issue is Rahul Ranjan.

Profile of the company

The company is one of the largest private multi-speciality tertiary care providers operating in the North and East regions of India in terms of bed capacity and operating revenues amongst the players that operate in the North and East regions of India, as of and for the financial year ended March 31, 2022, with key specialties of cardiology and cardiac science, neurosciences, oncology, digestive and hepatobiliary sciences, orthopaedics, liver transplant, and kidney and urology. Under the “Medanta” brand, the company has a network of five hospitals currently in operation (Gurugram, Indore, Ranchi, Lucknow and Patna) and one hospital (Noida), which is under construction. As at June 30, 2022, it provides healthcare services in over 30 medical specialties and engage over 1,300 doctors led by experienced department heads and, spanning an area of 4.7 million sq. ft., its operational hospitals have 2,467 installed beds.

The company strives to deliver advanced healthcare by establishing institutes of excellence that integrate medical care, teaching and research all while providing affordable medical services to patients. The company’s hospital at Gurugram was ranked as the best private hospital in India for three consecutive years in 2020, 2021 and 2022, and was the only Indian private hospital to be featured in the list of top 200 global hospitals in 2021 and was featured in the list of top 250 global hospitals in 2022 by Newsweek.

As at March 31, 2020, the company had 2,141 installed beds, which grew to 2,467 installed beds as at June 30, 2022, representing a growth of 15.23%. Upon operation of its Noida hospital in Fiscal 2025, it expects the number of total installed beds to exceed 3,500 at the end of Fiscal 2025, which will cater to domestic and international patients as part of its strategy to capitalize on medical tourism.

Proceed is being used for:

• Investment in two of its subsidiaries, GHPPL and MHPL, in the form of debt or equity for repayment/prepayment of borrowings, in full or part, of such Subsidiaries.
• General corporate purposes.

Industry Overview

India’s current healthcare expenditure is skewed more towards private as against public expenditure. Government expenditure on healthcare has remained range bound at 20-30% of the current healthcare expenditure from 2010 to 2016. The rest of the expenditure is private in nature (expenditure from resources with no Government control such as voluntary health insurance and direct payments for health by corporations (profit, not-for-profit and non-Governmental organizations) and households. However, the Government aims to increase public healthcare expenditure to 2.5%-3.0% of GDP by 2025 from the current 2%, according to the National Health Policy. The adequacy of a country’s healthcare infrastructure and personnel is a barometer of its quality of healthcare. India accounts for nearly a fifth of the world’s population, but has an overall bed density of merely 15 (as estimated by CRISIL Research for 2021), with the situation being far worse in rural than urban areas. India’s bed density not only falls far behind the global median of 29 beds (for 2017), it also lags that of other developing countries such as Brazil (21 beds for 2017) and Malaysia (19 beds for 2017). The bed density given data has been collected from latest reported WHO database accessed on September 26, 2022 other than for India.

Barring the momentary setbacks in fiscal 2021, the Indian healthcare delivery industry to post a healthy 13-15% CAGR between fiscals 2022 and 2026, driven by long term structural factors, strong fundamentals, increasing affordability and potential of the Ayushman Bharat scheme, the national health insurance scheme launched in 2018 to provide access to healthcare for low income earners in India.

Indian healthcare delivery market to reach approximately Rs 5.5 - 5.7 trillion in value terms by end of fiscal 2023, with growth being contributed by stabilisation of regular treatments, surgeries and OPD amid minimization of disruption due to the pandemic and expansion of Average revenue per occupied bed (“ARPOB”) for the sector. A potential upside is also expected from picking up of high realisation medical tourism as international travel restrictions are relaxed. Within the overall healthcare delivery market, the IPD is expected to account for nearly 70% (in value terms), while the balance is to be catered by the OPD. Though in terms of volumes, OPD volumes outweigh IPD volumes, with the latter contributing the bulk of the revenues to healthcare facilities. With long term structural factors supporting growth, renewed impetus from PMJAY and the Government focus shifting onto healthcare sector, the healthcare delivery market is expected to grow at 13-15% CAGR and reach Rs 8.3 trillion in fiscal 2026.

Pros and strengths

Focus on Clinical Research and Academics: The company is focused on clinical research and academics. Established in 2009, its clinical research facility is another driving force behind its high standard of care. It established “The Medanta Institutional Tissue Repository” in 2017 to promote biomarker and other tissue-based research. Doctors associated with its hospitals have published 451 peer reviewed indexed journal publications between January 2021 and June 2022. It has on-going research studies and are currently working with Qure.ai to develop artificial intelligence algorithms with the aim of increasing productivity and improving the accuracy and speed of medical diagnoses, particularly in radiology scans. It covers 37 specialties under the Diplomate of National Board (DNB) and Fellowship in National Board programs with over 100 approved seats (number of students that it can accept to train at its facilities). Since the inception of its academic program, the company has successfully graduated 325 students across 36 specialties for the DNB and, as at June 30, 2022, it had 184 students undergoing training at its hospitals.

‘Doctor-led’ hospitals driven by skilled and experienced doctors in the healthcare space: The company was founded by Dr. Naresh Trehan, a world-renowned cardiovascular and cardiothoracic surgeon. He has been awarded the highly prestigious Padma Bhushan and the Padma Shri by the Government of India and the BC Roy award as well as a special award for outstanding contributions as ‘Indian Father of Cardiac Surgery’ by the American Association of Cardiologists of Indian Origin. Under his leadership, the company has managed to successfully recruit and retain skilled and experienced healthcare professionals. As at June 30, 2022, it had a team of more than 6,000 medical professionals, including over 1,300 doctors and over 3,700 nurses and over 1,000 paramedical personnel.

Large-scale hospitals with sophisticated infrastructure: The company’s greenfield hospital at Gurugram has been designed with a focus on creating a safe and efficient environment for patient treatment. It was designed to comply with JCI requirements and encompassing all major medical specialities under one roof. The Gurugram hospital has a built-up structure of more than 2.0 million sq. ft. with 40 operating rooms, and installed bed capacity of 1,391 including 285 ICUs beds, as of June 30, 2022. In Lucknow, it has over 1.3 million sq. ft. and installed bed capacity of 473 as of June 30, 2022 with capacity to accommodate over 900 beds, while Patna has approximately 1 million sq. ft. with 228 installed beds as of June 30, 2022 (designed to accommodate over 500 beds).

Track record of operational and financial performance: The company has grown to hospitals with 2,467 installed beds across five cities as at June 30, 2022. The company has consistently delivered high operational and financial performance through high patient volumes, cost efficiency and diversified revenue streams across medical specialities. Over the years of service to patients, its dedication has helped it in enhancing the “Medanta” brand and its patients have placed a high degree of trust in it. Patient volume in Fiscals 2020, 2021 and 2022 and the three months ended June 30, 2021 and 2022 was 1,389,460, 1,178,230, 2,073,619, 440,766 and 590,476, respectively. The company’s newer hospitals have benefited from the established image and credibility of the “Medanta” brand, able to tap into their potential for growth.

Risks and concerns

Significant revenue comes from only five hospitals: Under the “Medanta” brand, the company has a network of five hospitals currently in operation (Gurugram, Indore, Ranchi, Lucknow and Patna) and one hospital (Noida), which is under construction. It also operates six multi-speciality clinics at DLF Cybercity Gurugram, Delhi Airport, south Delhi, Darbhanga, Patna and Subhash Chowk Gurugram. The company generates almost all of its revenues from these hospitals and clinics. Its operations at these hospitals and clinics are subject to various risks and uncertainties. Any loss of business or disruption of operations in these hospitals and clinics could have an adverse effect on its business, results of operations and financial condition.

Highly dependent on third-party suppliers and sub-contractors: The company sources a majority of its medical supplies, pharmaceuticals and equipment for its operations from third-party suppliers and sub-contractors. It also outsources various activities, such as cleaning and maintenance services, as well as security services, to sub-contractors. The use of third-party suppliers and sub-contractors exposes it to supply chain bottlenecks, quality problems, reputational damage from their actions, and other potential liabilities or disruptions that may arise in cases where such third-party suppliers and sub-contractors fail to meet their commitments. Any adverse change in relationship with third-party suppliers and sub-contractors, increases in the cost of their goods and services that it is unable to pass through to its patients or their insurers, or a supplier’s or sub-contractor’s inability to provide it with the requisite quantity and quality of supplies or services in a timely manner, its business, financial condition and results of operations could be materially adversely affected.

Highly dependent on doctors, nurses and other healthcare professionals: The company’s performance and growth strategy depends substantially on its ability to attract and retain experienced doctors, nurses and other healthcare professionals in a highly competitive industry. The demand for doctors is highly competitive. The availability of specialist doctors is limited by the training period, which can be up to 15 years and even longer for certain medical specialties. Skilled doctors are in high demand in India, making it difficult to hire and retain senior doctors. The company competes with other healthcare providers including public healthcare institutions to attract and retain doctors from a limited pool of candidates. The key factors that doctors consider for their place of employment include the reputation of the hospital, the quality of the facilities, the range of specialties offered by the hospital, the ability of the hospital to attract adequate patient load, research and teaching opportunities, compensation (subject to local rules and regulations) and community relations. It may not compare favorably with other healthcare providers on one or more of these factors.

Stiff competition from other hospitals: Increased competition in the healthcare industry could be caused by (i) existing or new hospitals in the geographies it operates in, (ii) the development of alternative health care delivery systems in its service areas; (iii) nursing homes, rehabilitation and therapy centers, physician group practices, urgent care centers and other non-hospital providers that provide services for which patients currently rely on hospitals; (iv) increased tele-health opportunities; and (v) the development of new health care cost cutting initiatives (vi) specialty and other service offerings (vii) quality and selection of healthcare professionals (viii) affordability (ix) brand and reputation, etc. Any increase in competition may lead to pricing pressure as well as challenges in talent acquisition for the company.

Outlook

The company is one of the largest multi-speciality tertiary care provider operating in the North and East regions of India in terms of bed capacity and operating revenues committed to its core mission of delivering advanced and affordable healthcare services to patients supported by technology and research. On the concern side, the company currently operates only five hospitals and six multi-speciality clinics and generates almost all of its revenues from these hospitals and clinics and any loss of business or disruption in the operations of these hospitals and clinics could have an adverse effect on its business, results of operations and financial condition.

The issue has been offered in a price band of Rs 319-336 per equity share. The fresh issue size is targeted to raise Rs 2232 crore. Minimum application is to be made for 44 shares and in multiples thereon, thereafter. On performance front, the company’s total income significantly increased by Rs 7,276.59 million, or 49.23%, from Rs 14,781.58 million in Fiscal 2021 to Rs 22,058.17 million in Fiscal 2022, primarily owing to the increase in patient volume, bed occupancy levels and ARPOB. Moreover, the company’s profit after tax was at Rs 1,962.02 million in Fiscal 2022 compared to Rs 288.05 million in Fiscal 2021. Going forward, the company will continue to leverage its scale and leading position to further enhance its operational efficiency and profitability at its facilities. It intends to develop super-specialities, such as bringing in new fields of practice such as chest surgery and add capabilities and specialities (e.g. robotic or automated surgeries in specialities that do not already regularly employ it at its hospitals). Further, the company is planning to on-board new doctors and employ new technology, machines and treatments by analyzing what can complement its current offering, which will help the company in coming time.