Krishna Institute of Medical Sciences‘ initial public offering (IPO) went live today, with the company hoping to collect Rs 2,143 crore through a mix of a fresh issuance and an offer for sale (OFS) by current shareholders. Krishna Institute of Medical Sciences (KIMS) is a significant healthcare organisation in the states of Andhra Pradesh and Telangana, has grown from a 200-bed hospital in 2000 to a multi-specialty hospital network today. After today’s opening, investors will be able to subscribe to the IPO until Friday evening. The company has raised Rs 956 crore from anchor investors ahead of the IPO.
The public offering of KIMS comprises of a new issue of equity shares worth Rs 200 crore, or 24.24 lakh equity shares with a face value of Rs 10 each. Existing shareholders would sell 2.35 crore equity shares as part of the offer for sale. Bhaskara Rao Bollineni, Rajyasri Bollineni, Bollineni Ramanaiah Memorial Hospital, Seenaiah Bollineni, and Bollineni Aishwarya are among the promoter selling stockholders. A healthcare investor, General Atlantic Singapore, will also be selling a share in the company. Promoter shares will decline to 38.8 percent from 46.8 percent after the IPO. The public’s portion of the company will rise to 61.2 percent from 53.2 percent now.
Investors can bid for the issue in a bid lot of 18 shares and multiples thereafter, at a price range of 815-825 per share. Qualified institutional investors will receive 75% of the offer, non-institutional investors will receive 15%, and retail investors will receive 10%. Employees of the company are eligible for a special discount of Rs 40 on the issue. The proceeds from the new offer would be used to repay Rs 150 crore of the company’s total debt, with the remainder going towards capex and other corporate purposes.
KIMS went from a loss-making company in 2019 to a profitable company in the prior fiscal year. According to brokerage and research firm Ventura Securities, KIMS’ revenues, EBITDA, and PAT grew at a three-year CAGR of 20.4 percent, 114 percent, and 105 percent between fiscal years 2017-18 and 2020-2021. “We value the stock at Rs 1,275 (17x FY24 EV/EBITDA),” says the research firm. Over the next 24 months, this offers a potential upside of 55 percent from the IPO price of Rs 825 a share (upper band),” they stated, while assigning the issue a ‘Subscribe’ grade for long-term investing.
According to ICICI Direct, KIMS has one of the best financial performances among peers. “Despite operating in an asset-heavy business, it also has a virtually debt-free balance sheet and healthy FCF in financial year 2020-21,” they added. With an eye on listing gains, the brokerage company has a ‘subscribe’ recommendation on the offering. “Expanding into additional geographies may reduce financials in the future due to stiff competition,” ICICI Direct stated.
Angel Broking analysts believe the IPO is undervalued in comparison to peers. “The company’s balance sheet is quite robust, with a negative Net Debt/Equity ratio. We anticipate that the planned expansion plans in Bangalore and Chennai can be supported mostly through internal accruals and loans. The issue has been assigned a “Subscribe” recommendation, they said.
Among the primary risks associated with KIMS, HDFC Securities believes the company is overly reliant on healthcare consultants. Furthermore, the pandemic has had an impact on business and will likely continue to do so in the future. According to HDFC Securities, the company’s sales are heavily reliant on hospitals in Hyderabad, with a large portion of its revenue coming from a few specialties. The issue has not been assigned a rating by the brokerage company.