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Salient features of the IPO:

* Inventurus Knowledge Solutions Ltd. (IKSL), is a technology-enabled healthcare solutions provider and offer a care enablement platform assisting physician enterprises in the US, Canada and Australia, with a focus on the US markets, is coming up with an IPO to raise around Rs. 2,377.6 - 2,497.9cr, which opens on 12th Dec. and closes on 16th Dec. 2024. The price band is Rs. 1,265 - 1,329 per share.

* This public issue is fully OFS, thus the company will not receive any proceeds from this public issue

* The promoter & promoter group (P&PG) entities are participating in the OFS and offloading 0.67cr equity shares. Individual public shareholders are also participating and offloading 1.2cr shares. Post-IPO, the P&PG and public shareholders will have 65.79% and 31.47% stake in the company, respectively.

Key competitive strengths:

* Comprehensive one-stop platform with diversified offerings across the outpatient and inpatient care value chain serving key stakeholders such as patients, physicians, nurses and healthcare organizations

* Leveraging digital evolution, transformation and automation technologies to create sustained value based on outcomes delivered

* Strong brand driven by clinical thought leadership through IKS Advisory Board, a healthcare industry leadership forum, and partnerships with industry players

* Marquee large enterprise clientele that include academic medical centres and healthcare systems, multispecialty and single-specialty medical groups, ancillary healthcare organizations

* Sustainable and scalable business model offering clients flexibility and cost-savings and high-touch engagement through access to project executive sponsors and leadership teams creating cross-selling opportunities

* Healthy financial performance with growth and improving margins

Risk and concerns:

* General slowdown in the global economic activities

* Revenue depends heavily on U.S. healthcare organizations, posing sector and geographic concentration risks

* Non-compliance with healthcare laws and regulations can lead to financial penalties and operational disruptions, harming the business

* Foreign currency exchange rate fluctuations may affect the company's operational results

* High attrition rate

Below are the key highlights of the company:

* The U.S. healthcare system is rapidly evolving, with Inpatient Care and Outpatient Services playing a critical role in its transformation. Healthcare organizations, including hospitals, are increasingly investing in these segments to enhance patient access, streamline operations, and reduce costs through financial consolidation.

* Between 2019 and 2023, hospital expenditures grew at an average annual rate of 5.7%. Looking ahead, this growth is expected to moderate slightly, with a projected CAGR of 5.1% through 2028. Overall health expenditure in the U.S. is estimated to rise from USD 4,799 bn in 2023 to USD 6,216 bn by 2028, reflecting a CAGR of 5.3%. Key drivers of this growth include an aging population and the increasing prevalence of chronic diseases. Additionally, the market for provider enablement technology solutions in the U.S. is poised for substantial growth, with the total addressable market projected to reach USD 323 bn by 2028.

* Incorporated on September 5, 2006, IKSL is a technology-driven healthcare solutions provider. The company offers a care enablement platform that supports physician groups in the US, Canada, and Australia, with a primary focus on the US.

Key highlights of the company (Contd…):

* IKSL partners with outpatient and inpatient care organizations to help them deliver high-quality clinical care, improve population health outcomes, and transition to the "fee-for-value" model. The platform also helps healthcare providers increase revenue efficiency and lower operating expenses. By combining innovative technology with global human expertise, IKSL empowers healthcare organizations to deliver safer, better, and more cost-effective care.

* In the U.S., outpatient care accounts for approximately 46% of total healthcare spending and is projected to grow faster than the overall healthcare industry. Outpatient care refers to medical services provided without the need for hospital admission. This includes services such as observation, consultations, diagnoses, rehabilitation, interventions, and treatments. In contrast, inpatient care, which represents about 54% of healthcare spending, involves medical treatment for patients admitted to a hospital or medical facility. This type of care typically requires an overnight stay or a longer duration and includes continuous, round-the-clock attention from healthcare professionals, including doctors, nurses, and support staff.

* As of September 30, 2024, IKSL serves 778 healthcare organizations, including health systems, academic medical centers, multispecialty and single-specialty medical groups, ancillary healthcare providers, and both outpatient and inpatient care organizations. Some of its clients include Mass General Brigham Inc., Texas Health Care PLLC, and The GI Alliance Management. The company supports its clients with a global workforce of over 13,528 employees, including 2,612 clinically trained professionals and a consultative sales team strategically located in key regions across the U.S., Canada, and Australia.

* IKSL stands out with its comprehensive suite of healthcare solutions covering the entire value chain. It focuses on five key areas to enhance its technology-enabled healthcare solutions: Revenue Cycle Management, Clinical Services, Value-Based Care, Scribe and Medical Transcription, and Coding. These services are designed to improve efficiency, streamline administration, and support better patient outcomes across the healthcare system.

* These segments demonstrate strong growth potential, with a projected CAGR of 11.7% from 2023 to 2028. Revenue Cycle Management leads with a total addressable market (TAM) of USD 18 bn, while Scribe and Coding Services have already achieved high market penetration. IKSL currently holds less than 1% of the provider-enabled technology solutions market, presenting a significant growth opportunity. As a premier healthcare enablement provider, the company is well-positioned to expand its market share and capitalize on the industry's growing potential.

* In October 2023, IKSL took a major step forward by acquiring Aquity Holdings which is engaged in technology-enabled clinical documentation, medical coding and revenue integrity solutions for healthcare. This strategic acquisition not only strengthened IKSL capabilities but also firmly established its presence in both inpatient and outpatient care sectors. Operating under the IKSL name, this merger has created a leading force in healthcare technology.

* The merger has significantly enhanced the company’s care enablement platform by integrating Aquity's extensive datasets. This allows the company to offer Aquity’s specialized solutions in clinical documentation, coding, and medico-legal documentation, tailored for inpatient care. The company has also leveraged this partnership to cross-sell to Aquity’s existing customer base of over 804 clients as of March 31, 2024. As a result, IKS Health’s total client base grew from 45 in FY22 to 853 in FY24 and stood at 778 as of September 30, 2024.

* The company aims to help clients focus on core operations by managing administrative tasks through its IKSL platform. This platform enhances productivity, efficiency, and physician wellness by providing digital support for structured administrative processes. Key features include clinical documentation, patient scheduling, automated prescription refills, document management, data migration, pre-visit summaries, and discharge summaries. By handling these tasks, the IKSL platform allows physicians and nurses to concentrate on complex, patient-facing care.

* IKSL primarily serves U.S.-based healthcare organizations, with most of its revenue coming from the United States. In FY22 and FY23, 100% of the revenue was generated from the U.S. In FY24, the U.S. contributed 97.82% of the revenue, while Canada accounted for 1.50%, Australia for 0.61%, and the UK for 0.06%. As of September 2024, the U.S. generated 95.78% of the revenue, Canada 2.39%, and Australia 1.83%.

* The company's top 10 clients contributed revenue of Rs. 520.5cr, Rs. 691.9cr, Rs. 793.6cr, Rs. 412.1cr, and Rs. 441.2cr, accounting for 68.16%, 67.09%, 43.66%, 65.34%, and 34.39% of its total revenue in FY22, FY23, FY24, and the six months ending September 30, 2023, and 2024, respectively. As of September 30, 2024, the average relationship tenure with these top 10 clients was 4.92 years.

Peer comparison and valuation:

IKSL is a technology-driven healthcare solutions provider offering a care enablement platform to support physician enterprises in the US, Canada, and Australia, with a primary focus on the US market. It offers a comprehensive platform that enables healthcare enterprises across outpatient and inpatient care. With the acquisition of Aquity Holdings, the company has seen its client increase which has positively impacted to both revenue and profitability.

There are no comparable peers having business model similar to IKSL. At higher price band, IKSL is demanding an EV/Sales of 9.7x, which appears to be aggressively priced. The company operates in a niche within the U.S. healthcare industry, positioning itself as a solutions provider. Management believes there is significant growth potential in this sector, as the U.S. healthcare market is vast. With consistent performance and strong relationships with major clients, IKSL appears well-positioned for long-term growth. However, the valuation raises concerns, and thus, we recommend a “Subscribe For Long Term” rating for this issue.

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