Rainbow Children’s Medicare IPO
Rainbow Children’s Medicare ltd. is an Indian hospital network that specializes in obstetrics, pediatrics and gynecology. It provides pediatric and neonatal critical care, gynecology and obstetrics, pediatric multi-specialty services, perinatal genetics, multidisciplinary fetal care and reproductive treatment, among other services.
The organization, which opened its first pediatric specialist hospital in Hyderabad in 1999, now manages 14 hospitals and three clinics in six locations, with a total bed capacity of 1,500 as of September 30, 2021. It may strive to extend the hospital network in the future by acquiring or developing assets. Rainbow’s Rs 1,581 crore upcoming IPO will be launched on April 27 and will finish on April 29. On April 26, the anchor book section opened for the day.
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Details of Rainbow Children’s Medicare Limited IPO
The business expects to raise Rs 1,581 crore through the upcoming IPO, which would be priced at the top of the pricing range. The IPO consists of a new issuance of shares worth Rs 280 crore and a promoter and investor offer for sale (OFS) of up to 2.4 crore shares. The price range for each share has been set at Rs 516 to Rs 542.
Rainbow Children’s Medicare would use Rs 40 crore of the net new issue proceeds to repay its non-convertible debentures and Rs 170 crore to build hospitals and buy medical equipment. The proceeds from the OFS will be distributed to the selling shareholders.
Brokerage Views on Rainbow Children’s Medicare Ltd IPO
The majority of analysts are optimistic about the company’s future. The company’s key triggers are the large underserved addressable market for children’s hospitals; comprehensive perinatal care provider with synergies between pediatric and perinatal services; and its hub and spoke model, which provides synergies and ensures better care and access for patients. The targeted market is expected to grow at a CAGR of 14 percent through FY26. However, continued growth despite greater consolidation in the healthcare market would be critical for Rainbow.
However, since the organization relies on its ability to recruit and retain medical personnel, there are certain inherent dangers. Given the issue’s innovative business concept and reasonable values, brokerages have a positive outlook. It is valued at 36.4x EV/EBITDA for FY21 and 22.9x EV/EBITDA for the first nine months of FY22 at the higher end of the pricing range.
Strengthening tertiary and quaternary pediatric services, as well as expanding presence via hub and spoke networks across major geographic clusters and new areas, are among core business initiatives. The fact that the company works in a regulated sector poses a number of hazards, including failure to comply with safety, health, environmental, labor, and other rules, as well as failure to acquire or renew approvals, licenses, registrations, and permits.
“Considering the trailing twelve months earnings per share or EPS of Rs 12.56 on a post-issue basis, the company is going to list at a price to earnings of 43.16x with a market value of Rs 5,501 crore, whereas peers Apollo Hospital Enterprise and Fortis Healthcare are trading at PEs of 77.3x and 56.9x respectively,” brokerages said.
Further Key Takeaways
Profitability for the nine months ending December 31, 2021 improved significantly from Rs 38.53 crore the previous fiscal year to Rs 126.41 crore this fiscal year. There is a possibility that this jump in profitability was due to the pandemic second wave of hospitalizations in the first quarter of FY22, which many feel may not continue. Given the specialized nature of the company, experienced management team, demonstrated ability to recruit, educate, and retain high-caliber medical personnel, and under-penetration of hospitals in India, brokerages feel the issue is “excellent for long-term investors.
Maintaining EBITDA margins would be difficult since the firm wants to grow beds by 500 in four to five years. The average revenue per operating bed has climbed by 57% in the previous two years, but increasing it from current levels will be tough, putting pressure on EBITDA margins. The revenue and return ratios have dramatically improved in the first nine months of FY22, and brokerages do not anticipate the firm to sustain this growth in the near future.
Brokerages estimates that the Rainbow Children’s Medicare Ltd IPO is priced at a PE of 30.4 times and an EV/EBITDA ratio of 13.8 times at the higher end of the pricing range, which is in line with the listed peer group. Visit Angel One today to discover more about the markets and the Rainbow Children’s Medicare limited initial public offer. You may establish a Demat account here and start trading and investing right away if you are new to the market.
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