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A super KEY CHANGES -speciality hospital chain in Delhi NCR.

Yatharth Hospital & Trauma Care Services Ltd. (Yatharth) is a private super-speciality hospital chain established in 2008 and located in the National Capital Region of Delhi. The company operates three super-speciality hospitals in the Delhi NCR, specifically in Noida, Greater Noida, and Noida Extension, Uttar Pradesh. Yatharth has acquired a 305-bedded multi-speciality hospital in Orchha, Madhya Pradesh (commenced operations in FY22), making it one of the largest hospitals in the Jhansi-Orchha-Gwalior region in terms of bed capacity. As of March 31, 2023, Yatharth has a team of 609 doctors, offering healthcare services across various specialities and super-specialities.

• The Indian healthcare industry is poised to achieve a healthy CAGR of ~11.3% over FY23-27E, driven by strong fundamentals, increasing affordability, and the potential of the Ayushman Bharat scheme (Source: CRISIL Report)

• The number of operational beds grew at a CAGR of 27.5% from 864 (FY21) to 1,405 (FY23), and the occupancy rate of beds increased from 42% in FY21 to 45% in FY23.

• Revenue from operations grew at a CAGR of 51% over FY21-FY23 from Rs.229cr to Rs.520cr in FY23 led by rise in In-patient volumes (~46% CAGR over same period), bed occupancy levels and an increase in average revenue per occupied bed.

• EBITDA grew at ~41%CAGR over FY21-23 and maintained a stable EBITDA margin of ~27.6% (3yr. Avg.) over the same period, led by better operational efficiencies.

• The RoE remained healthy at 33.6% (3yr. Avg.) over FY21-23. The current debt-to equity ratio is at 1.5x in FY23. Post IPO, by repaying Rs. 245cr, the debt–equity ratio will be reduced to 0.03x.

• 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.120cr.

• Further, Yatharth intends to utilise ~Rs.65cr of net IPO Proceeds for inorganic growth initiatives through strategic acquisitions to strengthen their presence in key growth markets.

• At the upper price band of Rs.300, Yatharth is available at a P/E of 39.2x (on FY23 EPS), which appears to be reasonably priced compared to its peers. Considering its consistent topline growth, stable margins, strategic acquisition, revival of medical tourism, and promising industry outlook, we assign a “Subscribe” rating on a medium to long term basis.

Purpose of IPO

The IPO consists of a fresh issue of Rs. 490cr and an offer for sale (OFS) of Rs.197cr by the selling shareholder. The proceeds from its fresh issuance worth Rs.245cr will be utilised for the repayment or prepayment of borrowings of the company & its subsidiaries, Rs.132.6cr for funding capital expenditure expenses of company & its subsidiaries, Rs.65cr for funding inorganic growth initiatives (through acquisitions) & other strategic initiatives and for general corporate purposes.

Key Risks

• Increasing competition, from regional competitors.

• Retention of doctors and other healthcare professionals.

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