Yatharth Hospital IPO Detailed (Subscribe)

Highlights

Yatharth Hospital and Trauma Care Services Limited, incorporated in 2008, is a multi-care hospital network. They are among the top ten largest private hospitals in Delhi’s National Capital Region. Yatharth Hospital now operates three super speciality hospitals in Noida, Greater Noida, and Noida Extension, Uttar Pradesh. Furthermore, Noida Extension Hospital is one of the major hospitals in the area, with 450 beds. The company acquired a 305-bed multi-speciality hospital in Orchha, Madhya Pradesh, to expand its operations and services. This is also one of the largest hospitals in the area. As of March 31, 2023, they engaged 609 doctors and offer healthcare services across several specialities and super specialities.

The super speciality or Centres of Excellence (COE) of the hospital includes: (i) Centre of Medicine (ii) Centre of General Surgery (iii) Centre of Gastroenterology (iv) Centre of Cardiology (v) Centre of Nephrology & Urology (vi) Centre of Pulmonology (vii) Centre of Neurosciences (viii) Centre of Paediatrics (ix) Centre of Gynaecology (x) Centre of Orthopaedics and Spine & Rheumatology.

Their hospitals are built to meet international quality standards. Their three hospitals in Delhi NCR are National Accreditation Board of Hospitals (NABH) accredited. They have got National Accreditation Board for Testing and Calibration Laboratories (NABL) certification for their Noida Extension Hospital and are in the process of applying for NABL certification for their Greater Noida Hospital. They have NABH accreditation for all their hospitals, and their hospitals in Greater Noida and Noida Extension also hold NABL accreditation.

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Key Highlights

• Post-IPO Company will be Debt free company. As the company will utilize some proceeds of an IPO for repayment/ prepayment of its Borrowings and subsidiaries’ borrowings. Because of this repayment/prepayment, the Company will save Rs 213 mn yearly.
• In the last quarter of FY22, they acquired a 305-bed Jhansi-Orchha hospital, which is one of the largest hospitals in the Jhansi-Orchha-Gwalior region in terms of bed capacity. On April 10, 2022, the Jhansi-Orchha Hospital commenced commercial operations, and as of March 31, 2023, it had 11 modular and various operating theatres, along with 76 critical care beds.

• The company has undertaken a Pre-IPO Placement of 4,000,000 Equity Shares at a price of Rs 300/- per share, aggregating to Rs 1200 mn.
• The company has 1405 total beds with occupancy of rate in FY21 was 41.63 pct, FY22 was 49.97 pct and FY23 was 45.33 pct which is below the industry average of 61 pct. However, the company is planning to double its capacity in the next 3-4 years.
• Yatharth has the lowest procurement cost as compared to Peers. Yatharth procurement cost is 17.9 pct, whereas Max Healthcare’s procurement cost is 20.1 pct and Apollo’s procurement cost is 51 pct.
• The company will utilize some portion of the IPO proceeds for organic or inorganic acquisition. The company will acquire hospitals that have no less than 300-400 beds capacity. The expected location of the hospitals would be Faridabad, Ghaziabad, the upside of the Delhi NCR, Utter Pradesh.
• A lot of new surgery started offered by the company after Covid 19, such as kidney transplants, Cardiology, Neurology etc. apart from it. The Company will spend Rs 1300 mn for the adaptation of robotics surgery.
• Yatharth is affiliated with a number of third-party health insurance administrators and non-life insurance companies, as well as numerous government organizations such as Employees’ State Insurance Corporation (ESIC), Central Government Health Scheme (CGHS), Ex-Servicemen Contributory Health Scheme (ECHS), and public and private enterprises. From March 31, 2021, to March 31, 2023, the number of operating beds increased at a CAGR of 27.52 pct
• Yatharth has proven consistent operating and financial performance as well as growth over the last three fiscal years. Their great operational efficiency, which they achieve by streamlining their clinical and administrative operations, constantly implementing process improvements, and assuring economies of scale, can be attributed to their revenue and profit growth. While they invest significantly in constructing and increasing bed capacity, as well as opening new hospitals, they try to incur lesser capital expenditure by making better use of available space in their hospitals and working better with equipment suppliers.

Key Risk

• The company is offering a 20 pct lower price than competitors offering products/ services at arm’s length price.
• A significant percentage of the Net Proceeds from the Fresh Issue is designated for Jhansi-Orchha Hospital, which was closed from FY20 to FY22 and lost money in F 2023.
• Yatharth’s average attrition rate in Medical Professionals for 3 years is 68.15 pct and the overall average attrition rate is 97.3 pct.

Valuation

At the upper end of the price band, the issue is quoting at PE of a PE of 39.16x (to its FY23 earnings) at the upper end of the range. Its peers like Apollo Hospital, Fortis Healthcare, and Narayana Hrudayala trade at PE in excess of 60x. However, they are not fully comparable. Considering its long-term prospects, investors can Subscribe to this issue.

Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.