IPO Note - Krishna Institute of Medical Sciences Ltd By Nirmal Bang
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BACKGROUND
Krishna Institute of Medical Sciences Ltd (KIMS) is one of the largest corporate healthcare groups in AP and Telangana in terms of number of patients treated and treatments offered. It provides multi-disciplinary integrated healthcare services, with a focus on primary secondary & tertiary care in Tier 2-3 cities and primary, secondary, tertiary and quaternary healthcare in Tier1 cities. It operates 9 multi-specialty hospitals under the “KIMS Hospitals” brand, with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of March 31, 2021
Objects of the Issue
The issue of Rs 2144 cr comprised of Rs 200 cr fresh issue and Rs 1944 cr Offer for Sale. The company intends to utilize the funds for repayment of debt.
Investment Rationale
* Increase in Profitability despite addition in bed capacity
* Strong Regional Focus
* Affordable Pricing
* Diversified Revenue across Specialties
* Healthy Financials
Valuation and Recommendation
The healthcare industry in India is poised for growth. The Indian healthcare delivery industry is expected to grow at a 17-18% CAGR (2020 - 2024E) and reach Rs 7.07 trillion by 2024. KIMS has emerged as a dominant player in AP and Telangana and successfully created a niche of its in affordable quality multispecialty healthcare space. The low-leverage approach for expansion and tight control on costs has resulted in KIMS getting one of the highest margins and ROEs among the peer group. Between FY18-21, KIMS revenues have grown at CAGR of 26% while EBITDA grew by 78%. We believe, the company has a sustainable growth model with steady margins. Considering the healthy balance sheet, robust revenue growth and strong cash flow generations we have a positive view on the company. At upper band of Rs 825, the company is commanding 18.4x EV/EBITDA which we believe is attractive and recommend “Subscribe”.
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