Aatmaj Healthcare NSE SME IPO review (May apply)

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Review By Dilip Davda on June 16, 2023

•    AHL is running four hospitals under "Jupiter Brand" in Vadodara.
•    It has a combined capacity of 130 beds, expandable up to 175 beds.
•    The company has posted growth in its top and bottom lines for the reported periods.
•    Based on its financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long-term rewards.

PREFACE:
AHL is currently operating a healthcare service chain under the name of "Jupiter Hospital" and has just one such outlet at Vadodara. In comparison, Jupiter Hospital in Maharashtra has three hospitals i.e. Thane, Pune and Indore. AHL has nothing to do with Jupiter Hospital at Thane. AHL has four hospitals in and around Vadodara in Gujarat. It has plans to acquire more hospitals in the nearby regions i.e. Surat, Jambusar, Bharuch, Narmadanagar etc. Post the Pandemic, awareness and alertness among the common man has increased multifold and that augurs well for the healthcare segment. Gujarat has become the global destination for healthcare services and thus, this company has bright prospects going ahead. 

ABOUT COMPANY:
Aatmaj Healthcare Ltd. (AHL) is engaged in providing healthcare services from its four group hospitals i.e. Jupiter Hospital-TCH, JTP Hospital-Muval, JTP Hospital- Padra, and Tirth Hospital having a total bed capacity of 130 expandable up to 175 beds. The company is a growing organization that aims at strengthening and establishing itself as the foremost healthcare services provider. 

It has a team of medical practitioners who ensures that patients get quality healthcare services. Its dedicated team is trained to take care of the patients and handle health-related emergencies. AHL is a part of Ayushman Bharat-Pradhan Mantri Jan ArogyaYojana, a flagship scheme of the Government of India launched and recommended by the National Health Policy 2017, to achieve the vision of universal health coverage (UHC). The initiative has been designed along the lines as to meet SDG and its underlining commitment. Ayushman Bharat is an attempt to move from a sectoral and segmented approach to health service delivery to a comprehensive need-based health care service and Mukhyamantri Amrutam (MA) scheme is launched by Gujarat state to cater for families below the poverty line.

Its healthcare facilities consist of advanced technology and doctors, nurses and other healthcare professionals follow treatment protocols that match acceptable standards. As of the date of this Prospectus, it provides inpatient and outpatient healthcare services through its hospitals in Vadodara, Gujarat. As of December 31, 2022, it has conducted an aggregate healthcare treatment, including surgeries, of over 20,000 patients, consisting of more than 5,000 patients and more than 15,000 OPD patients including Covid-19 Patients. As of December 31, 2022, it had 95 employees on its payroll and 30 consultant doctors in various departments. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden IPO of 6400000 equity shares of Rs. 5 at a fixed price of Rs. 60 per share to mobilize Rs. 38.40 cr. The issue opens for subscription on June 19, 2023, and will close on June 21, 2023. The minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 28.32% of the post-IPO paid-up capital of the company. AHL is spending Rs. 3.10 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 9.00 cr. for repayment/prepayment of existing debt, Rs. 6.00 cr. for working capital, Rs. 9.13 cr. for purchase of medical equipment and/or new acquisition of set up of hospitals, Rs. 6.20 cr. for inorganic growth through acquisitions and other strategic initiatives, and Rs. 4.97 cr. for general corporate purposes. 

Nirbhay Capital Services Pvt. Ltd. is the sole lead manager and Link Intime India Pvt. Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker of the company. 

The company issued/converted initial equity shares at par value and has also issued bonus shares in the ratio of 3 for 1 in July 222, and 1 for 2 in November 2022. The average cost of acquisition of shares by the promoters is Rs.1.67 per share. 

Post-IPO, AHL's current paid-up equity capital of Rs. 8.10 cr. will stand enhanced to Rs. 11.30 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 135.60 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AHL has (on a standalone basis) posted a turnover/net profit - (loss) of Rs. 4.37 cr. / Rs. - (0.27) cr. (FY20), Rs. 17.26 cr. / Rs. 4.12 cr. (FY21), and Rs. 21.81 cr. / Rs. 4.92 cr. (FAY22). For 9M of FY23, it earned a net profit of Rs. 5.77 cr. on a turnover of Rs. 20.48 cr. On a consolidated basis for FY22 and 9M of FY23, it has posted the same numbers for financial performance. 

For the last three fiscals, AHL has reported an average EPS of Rs. 5.41 and an average RoNW of 53.67%. The issue is priced at a P/BV of 7.00 based on its NAV of Rs. 8.57 as of December 31, 2022, and at a P/BV of 2.59 based on its post-IPO NAV of Rs. 23.13 per share. 

If we annualize FY23 earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of around 17.60. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Krishna Institute, Kovai Medical and KMC Speciality as their listed peers. They are currently trading at a P/E of 51.87, 20.46, and 40.26 (as of June 16, 2023). However, they are not truly comparable on an apple-to-apple basis. Surprisingly its peers' list does not include Aashka Hospitals Ltd.

MERCHANT BANKER'S TRACK RECORD:
This is the 1st mandate from Nirbhay Capital in the current fiscals and hence has no track record of past mandates. 

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