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Goodwill Hospital IPO Review by MLR Securities (Avoid)

Review By MLR Securities Private Ltd on January 4, 2012

Issue Period: 30th Dec - 9th Jan 
Price Band (Rs): 175-185 
Issue Size (Rs Cr): 62 
Mcap (Rs Cr): 220-229 
Grading: CARE IPO Grade 3 
BRLM: SPA Merchant Bankers ltd 
Promoter: Ojjus Medicare 
Listing: BSE & NSE

Objects of the Issue

  • Establishment of Polyclinics - Rs 34 Cr
  • Setting up of Diagnostic Centre at Faridabad - Rs 16 Cr
  • Repayment/Prepayment of loans - Rs 10 Cr
  • Gamma Knife procedures being the super specialty treatment contributed 33% and 31% to the total income in FY10 and FY11 respectively.
  • The inpatient admission has increased from 16 per day during FY10 to 26 per day during FY11. The outpatient registration has also increased from 57,000 patients in FY10 to 88,487 patients in FY11. The average revenue per bed increased to Rs 13,000 in FY11 from Rs 7,000 in FY10.  The average occupancy rate in  FY11 was 54% and in 1QFY12 it was 58%.
  • The company's total income grew by 134% in FY11 to Rs 53.6 Cr as the company increased number of beds from 140 beds to 220 beds. EBITDA margin declined from 75% in FY10 to 72% in FY11 while PAT margin improved to 29% in FY11 from 12% in FY10. The company posted revenue of Rs 16 Cr in Q1FY12 with a PAT margin of 27% to Rs 4.3 Cr.
  • With the improvement in earnings return ratios also improved. RoE improved to 48% in FY11 from 21% in FY10. The company is highly leveraged with a debt equity ratio of 2.8 as the capex was debt funded.

Conclusion / Investment Strategy

The company is asking for a valuation of 15 times FY11 EPS on an upper price band of Rs 185 and a P/BV of 2.4 times. Its peers like Fortis Malar Hospitals and Noida Medicare are trading at 9.4 and 5 times their trailing earnings respectively.

Also, the EV/Bed of the company is  quite high at 1.45 times compared to Fortis Malar Hospitals and Noida Medicare which are trading at an EV/Bed of 0.33 and 0.25 times respectively.

We recommend investors to avoid the issue because of its aggressive pricing and high leverage.

Reviewer recommends Avoid to the issue.

Review By MLR Securities Private Ltd on January 4, 2012

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