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Salient features of the FPO:

Salient features of the FPO

 • South India focused pediatric multi-specialty hospital chain operator, Rainbow Children’s Medicare Ltd. (RCML)is coming up with an IPO to raise Rs. 1,581cr, which opens on 27th Apr. and closes on 29th Apr. 2022. The price band is Rs. 516 - 542 per share.

• The IPO is a combination of fresh issue and OFS portion. It will not receive any proceeds from the OFS part. Of the fresh issue net proceeds, Rs. 40cr will be utilized for the early redemption of non-convertible debentures, while another Rs. 170 will be used to fund the capex requirement mainly towards setting up new hospitals and purchase of medical equipment.

• On 22nd Oct. 2021, the company executed a right issue by allocating 0.193cr shares at Rs. 140 per share.

Key competitive strengths:

• Ability to conceptualize, create and operate specialized children’s hospitals

• Leading pediatric multi-specialty healthcare chain with strong clinical expertise in managing complex diseases

• Comprehensive perinatal care provider, with synergies between pediatric and obstetrics and gynecology services

• Hub-and-spoke model that provides synergies and ensures better care and access for patients

• Proven ability to attract, train and retain high-caliber medical professionals

• Strong track record of growth, operational and financial performance

• Experienced senior management team with strong institutional shareholder support

Risk and concerns:

• Unfavorable government policies and regulations

• Delay in hospital network expansion

• Deterioration in hospital operating metrics

• High attrition rate among the medical professionals

• Difficulty in sustaining current profitability margins

• Competition

Below are the key highlights of the company:

• The domestic maternity health market (Rs. 38,000cr) has grown by 8% CAGR over FY16-20 and is expected to grow by 7-8% CAGR between FY20-26 to reach a size of Rs. 60,000cr. This market expansion is likely to be supported by strong growth from the private sector, which is forecasted to grow by 11- 12% CAGR during the same period. The private sector is expected to grow faster mainly on account of increased penetration of institutional deliveries, rising share of private hospitals in rural & urban areas, increase expenditure on maternity healthcare, and rise in treatment cost

• The domestic pediatric market (Rs. 1.01lakh cr), having grown at 14% CAGR over FY16-20 is expected to grow at similar rate going forward, supported by growth in both private and public sector healthcare units. Increasing awareness on childcare and early diagnosis is expected to contribute to growth in the market.

• Among the key players in the domestic maternity & pediatric healthcare market, RCML is one of the largest multi-specialty pediatric care providers (based on hospital beds, as of 31st Mar. 2021), with a presence across various specialties such as neurology, nephrology, gastroenterology, oncology and cardiology. It has built a comprehensive pediatric critical care program with around one-third of its operational beds (at all its hospitals) allocated to critical care. Additionally, the company had established an advanced neonatal & pediatric intensive care services across its hospitals

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