KK Shah Hospitals coming with IPO to raise Rs 8.78 crore

KK Shah Hospitals

• KK Shah Hospitals is coming out with an initial public offering (IPO) of 19,50,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 45 per equity share.
• The issue will open for subscription on October 27, 2023 and will close on October 31, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4.50 times higher to its face value of Rs 10.
• Book running lead managers to the issue are Fedex Securities and Shreni Shares. 
• Compliance Officer for the issue is Saloni Badjatya. 

Profile of the company

The company is engaged in the business of providing healthcare services, with 26 beds for in-patients and out-patients treatment, its hospital is also equipped with diagnostic devices such as CT scan, DEXA scan, BMD, sonography, XRay machines. It is certified by National Accreditation Board for Hospitals and Healthcare Providers (NABH Accredited) as a primary-level small healthcare organization in Madhya Pradesh.

The company is a growing organization that aims at strengthening and establishing ourselves as the foremost healthcare services provider. It aims towards continuous improvement of its healthcare facilities and to achieve a level of care and quality. Also, it has associations and affiliations with insurance companies that process insurance claims admissible under policy for its patients. Its healthcare facilities consist of advanced technology and its doctors, nurses and other healthcare professionals follow treatment protocols that match acceptable standards.

Proceed is being used for:

• Purchase of medical equipment.
• General corporate purposes.

Industry overview

Healthcare has become one of India’s largest sectors, both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services, and increasing expenditure by public as well private players. India’s healthcare delivery system is categorised into two major components - public and private. The government, i.e. public healthcare system, comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas. The private sector provides majority of secondary, tertiary, and quaternary care institutions with major concentration in metros, tier-I and tier-II cities.

The Indian healthcare sector is expected to record a three-fold rise, growing at a CAGR of 22% between 2016-22 to reach $372 billion in 2022 from $110 billion in 2016. By FY22, Indian healthcare infrastructure is expected to reach $349.1 billion. In the Economic Survey of 2022, India’s public expenditure on healthcare stood at 2.1% of GDP in 2021-22 against 1.8% in 2020-21 and 1.3% in 2019-20. In FY22, premiums underwritten by health insurance companies grew to Rs 73,582.13 crore ($9.21 billion). The health segment has a 33.33% share in the total gross written premiums earned in the country.

In order to promote medical tourism in the country, the government of India is extending the emedical visa facility to the citizens of 156 countries. In July 2022, the World Bank approved a $1 billion loan towards India's Pradhan Mantri Ayushman Bharat Health Infrastructure Mission. In May 2022, the Union Government approved grants for five new medical colleges in Gujarat with a grant of Rs. 190 crore ($23.78 million) each. These colleges will come up in Navsari, Porbandar, Rajpipla, Godhra and Morbi.

Pros and strengths:

Clinical excellence and affordable healthcare: Since its operation commenced in the year 1976, it delivers clinical excellence through quality healthcare service supported by a combination of experienced medical talent, strong clinical and patient safety protocols and investments in new medical technology. Its hospital provides comprehensive healthcare services across a range of specialties. It offers its various healthcare services at affordable prices.

Experienced player: Its strong brand equity is evident from the consistent growth in its inpatient and outpatient base and corresponding in its revenues. Its brand equity and operational experience provides it with the platform to further expand its presence and operations in select locations across the state.

Experienced Promoters and management team: The experience and depth of its Promoters and management team to be a distinctive competitive advantage in the complex and rapidly evolving healthcare industry in which it operates. Many of its senior management team members and hospital management personnel are also qualified doctors. Its team of senior managers is dedicated and experienced, with expertise in the healthcare services industry. 

Risks and concerns

Revenue dependent on in-patient and out-patient treatments: Its business is dependent on patient footfall in its hospitals. Its revenues come from in-patients and out-patients who are not covered by arrangements with insurance companies. Its revenues will decline significantly if the number of patients visiting its hospitals reduces. In markets where it does not have an existing presence, its ability to reach out to patients may be limited and it may need to position ourselves and offer services in a competitive manner. Patients may choose not to take treatment at its hospitals and instead choose a competitor’s facility, including by reason of its charges for treatment not being competitive. 

Highly dependent on doctors, nurses and other healthcare professionals: Its performance and the execution of its growth strategy depend substantially on its ability to attract and retain doctors and other healthcare professionals. The market for doctors is highly competitive and there is a general shortage of doctors in India. The factors that doctors consider important before deciding where they will work include the level of compensation, the reputation of the hospital and its owner (s), the quality of the facilities, research opportunities and community relations. Its performance also depends on its ability to identify, attract and retain other healthcare professionals, including nurses, to support the multi-specialist and super specialist practices at its hospital.

Lack of health insurance in India: A large population of India is not covered by health insurance. In the absence of health insurance, procedures and diagnostics involving significant costs may not be affordable to a number of patients. Such patients may choose not to undergo such procedures, despite being in need of them, or may choose to undergo similar procedures from hospitals which are less costly. As a result, it may not be able to undertake such procedures and may lose out on revenues it may expect to realize from such procedures.

Outlook

The company is engaged in the business of providing healthcare services. Its hospital is also equipped with diagnostic devices such as CT scan, DEXA scan, BMD, sonography, XRay machines. It is certified by National Accreditation Board for Hospitals and Healthcare Providers as a primary-level small healthcare organization in Madhya Pradesh. On the concern side, it operates in a competitive atmosphere. It faces varying levels of competition in each micro-market it operates from. Its competition consists of both institutionalized hospitals that have a pan-Indian presence and local physicians and clinics that operate only in particular towns and cities. Some of its competitors may have greater resources than those available to it.

The company is coming out with an IPO of 19,50,000 equity shares of Rs 10 each at a fixed price of Rs 45 per share to mobilize Rs 8.78 crore. On performance front, its total revenue amounted to Rs 214.11 lakh for the financial year ended March 31, 2023. Profit after tax for the financial year ended March 31, 2023 is Rs 21.81 lakh. Going forward, it intends to focus on its ongoing day care services and introduce new day care offering. Over the years, it have established a diverse portfolio of outpatient offerings, including health check-up programs, various forms of laboratory testing, diagnostics (e.g., high end imaging work) and physiotherapy. Such offerings lead to an increase in outpatient admissions at its hospital.