Yatharth Hospital and Trauma Care Services coming up with IPO to raise upto Rs 712.34 crore

Yatharth Hospital and Trauma Care Services

• Yatharth Hospital and Trauma Care Services is coming out with a 100% book building; initial public offering (IPO) of 2,37,44,672 shares of Rs 10 each in a price band Rs 285-300 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on July 26, 2023 and will close on July 28, 2023.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 10 and is priced 28.50 times of its face value on the lower side and 30.00 times on the higher side.
• Book running lead managers to the issue are Intensive Fiscal Services, Ambit and IIFL Securities.
• Compliance Officer for the issue is Ritesh Mishra.  

Profile of the company

The company’s hospitals (i.e., Noida Extension Hospital and Greater Noida) are the eighth and 10th largest private hospital in the National Capital Region of Delhi (Delhi NCR), respectively, in terms of number of beds in Fiscal 2023. The company operates three super specialty hospitals located in Delhi NCR, i.e., at Noida, Greater Noida and Noida Extension, Uttar Pradesh. Further, it acquired a 305-bedded multi-speciality hospital in Orchha, Madhya Pradesh near Jhansi, Uttar Pradesh (Jhansi-Orchha) which commenced commercial operations in from April 10, 2022, and is one of the largest hospital in Jhansi-Orchha-Gwalior region in terms of number of beds. With this acquisition, its total bed capacity has increased to 1,405 beds as of the date of this Red Herring Prospectus. In addition, its critical care program comprises 394 critical care beds, as of March 31 2023. Further, its Noida Extension hospital with 450 beds is one of the largest hospitals in the Noida Extension, Uttar Pradesh region.  As of March 31, 2023, the company engaged 609 doctors and offer healthcare services across several specialties and super specialties.

For better and more focussed patient care, the company has carved out the super specialty as Centres of Excellence (COE) namely Centre of Medicine, Centre of General Surgery, Centre of Cardiology, Centre of Neurosciences, Centre of Nephrology & Urology, Centre of Paediatrics, Centre of Pulmonology, Centre of Gynaecology, and Centre of Orthopaedics & Spine & Rheumatology. Establishing COEs involves equipping these specialties with (i) advanced medical infrastructure; (ii) trained and experienced doctors, nursing, paramedical and other staff; and (iii) resources to provide a better healthcare experience to the patient and attendants. The company’s COEs represent its top 10 revenue-generating specialties. Its COEs are led by a team of respective domain expert doctors who are ably assisted by other doctors in its pursuit of providing better healthcare services to its patients. Further, while it has have started bone marrow and kidney transplant operations at its hospitals located in Noida Extension and Greater Noida, it also intends to introduce new specialties such as radiation therapy to its oncology department at its hospitals located in Noida Extension and Jhansi-Orchha.

The company’s hospitals have been designed to comply with international quality standards. All its hospitals are accredited by the NABH while its hospitals located at Greater Noida and Noida Extension are also accredited by NABL. All of its hospitals offer spacious suites along with modern deluxe and super deluxe rooms, and comfortable patient waiting areas. Its diagnostic areas are designed with the goals of providing patient-friendly, spacious and relaxing environments. It has advanced medical equipment such as Azurion catheterization laboratory, 1.5 Tesla wholebody MRI with optical digital broadband and embedded express coil technology for minimal patient repositioning and advanced non-contrast MR Angiography, 128 slice CT scan, endo bronchial ultrasound, nerve conduction velocity (NCV), advanced surgical equipment including Thulium Uro laser, flexible scope, advance laparoscope, advance microscopes, Cusa set. The advanced equipments provide for better and more accurate diagnosis, as well as insight into the surgical procedure, which increases surgical success rate. Some of its modular operation theatres are equipped with high efficiency particulate air (HEPA) filters and laminar flow, operating microscopes with image intensifiers. Its in-house diagnostic radiology setup and diagnostic labs are well equipped centres with comprehensive diagnostic capabilities including, haematology, biochemistry, microbiology, molecular biology and histopathology along with 24x7 in-house pharmacy shops.

Proceed is being used for:

• Repayment/ prepayment, in full or part, of certain borrowings availed by the Company.
• Repayment/ prepayment, in full or part, of certain borrowings availed by the Subsidiaries, namely, AKS Medical & Research Centre Private Limited (AKS) and Ramraja Multispeciality Hospital & Trauma Centre Private Limited (Ramraja).
• Funding capital expenditure expenses of the company for two hospitals, namely, Noida Hospital and Greater Noida Hospital.
• Funding capital expenditure expenses of its Subsidiaries, AKS and Ramraja, for respective hospital operated by them.
• Funding inorganic growth initiatives through acquisitions and other strategic initiatives.
• General corporate purposes.

Industry overview

The Indian healthcare delivery system has seen consolidation in recent years. A highly competitive industry, coupled with tightening of healthcare regulations, has made it difficult for smaller players in the industry to stay profitable. Larger hospital brands typically have stronger financial discipline and negotiating power with suppliers, better ability to attract medical talent, and greater capital and administrative resources to meet these needs over standalone hospitals. Many of the established players in the healthcare delivery industry follow inorganic growth to expand into the geographies where they have limited presence. Rise in demand for health infrastructure, modern technologies and multi-disciplinary healthcare have been some of the key driving factors for consolidation in the industry. Investments by private equity (PE) players is also gaining traction. Majority of the PE deals in the industry in the past 2 to 3 years have been towards hospital portfolio consolidation, also enabling formation of regional clusters that provide base for further expansion and consolidation. The healthcare sector in India has attracted private equity investments worth $ approximately 8 billion in the last five years, making the sector one of the most preferred by investors.

With long term structural factors supporting growth, renewed impetus from PMJAY and government focus shifting onto healthcare sector, the healthcare delivery market is expected to grow at approximately 11.3% compounded annual growth rate and reach Rs 8.6 trillion in Fiscal 2027. From Fiscal 2018 to Fiscal 2022, major hospital chains have added supply (approximately 2% to 3% of their incremental supply during the period). The supply was largely affected during the Covid period as from fiscal 2020 to Fiscal 2022, major hospital chains supply declined by approximately 1-2%. The government had also converted many hospitals into full time COVID-19 treatment centres during this time. The government is also expected to augment this via the Ayushman Bharat scheme which aims to create 1,50,000 Health and Wellness centers (approximately 1,54,338 HWC's created until December 2022) for strengthening primary and secondary infrastructure in the country. The other contributors to the demand are more structural in nature, like, increase in lifestyle-related ailments, increasing medical tourism, rising incomes and changing demography. 

Pros and strengths

Among the leading super-specialty hospital in Delhi NCR with diverse specialty and payer mix: The company’s hospitals (i.e., Noida Extension Hospital and Greater Noida) are the eighth and 10th largest private hospital in the National Capital Region of Delhi (Delhi NCR), respectively, in terms of number of beds in Fiscal 2023. Its use of compassionate patient care, technology, and experienced medical practitioners enable it to offer its patients comprehensive patient care services with individualized attention. Its advanced facilities coupled with its diverse specialisations and tailored best practices, differentiate it from its regional competitors. Given its market position in the expanding medical industry and growing medical tourism in the Delhi NCR region, there are opportunities to build more hospitals in existing and new markets as well as enhance its local community presence. It also generate revenue from different customers, which include government bodies established by the GoI under prevailing statutes such as ESIC, EGHS, ECHS, public and private insurance companies working directly or through registered third party administrators (TPAs), various institutions, public and private corporates and walk-in customers. Over the last three fiscals, it has seen its payer mix change as the percentage of revenue from insurers acting through third party administrators increase to achieve a more balanced revenue split between its payer categories.

Advanced and high-end medical equipment and technology: The company’s hospitals are equipped with machines and devices with sophisticated technology. Its hospitals are designed to assist its practitioners in providing timely, efficient and quality healthcare. It also equips its hospitals with advanced medical technology and equipment and diagnostic instruments with the aim of providing its patients with accurate diagnoses and effective treatments. In addition, all of its hospitals are accredited by the NABH while its hospitals located at Greater Noida and Noida Extension is also accredited by NABL. It continuously strives to introduce cutting-edge medical technology and state-of-the-art equipment and facilities across each aspect of its healthcare services, from out-patient to in-patient. It also has well-equipped modular and other operation theatres with three stage air filtration and laminar flow to ensure patient safety, as well as operating microscopes, image intensifiers, and laparoscopic equipment. Its blood bank meets several standards and has been set up with facilities such as aphaeresis and blood component separation.

Ability to attract quality doctors, nurses, paramedical, and other staff: The company’s success can be partially attributed to its highly qualified medical professionals and other staff, and its ability to attract such quality professionals and staff. As at March 31, 2023, it engaged 3,303 individuals, which included 609 doctors, of which 267 were consultant doctors, 178 were resident medical officers and 164 were visiting doctors. All the doctors it engages are qualified, certified medical professionals and include specialists in numerous medical specialties. As at March 31, 2023, its staff included 799 nurses, 379 paramedical, and 1,516 corporate and support staff. Many of its specialists, physicians and surgeons are regular faculties and attendees at some of the premier medical conferences. They have also received various accolades and awards, such as GRIMPER Best Publication Award in 2012 awarded to Dr. Neeraj Chaudhary for his paper regarding acute necrotizing pancreatitis and the Delhi Ratan award by All India Conference of Intellectuals in 2011 awarded to Dr. Girish Chander Vaishnava for his distinguished services rendered to the society at large. The company continuously endeavours to undertake initiatives to ensure that the attrition rates for its doctors remain low, through various doctor engagement models and by providing doctors an environment conducive to continuous upgrading of their skills. 

Track record of stable operating and financial performance and growth: The company has demonstrated stable operating and financial performance and growth over the past three fiscals. Its growth in revenue and profitability can be credited to its strong operational efficiency, which it achieve by streamlining its clinical and administrative functions, continually introducing process innovations, and ensuring that it maintain economies of scale. Its number of operational beds which increased from 864 in Fiscal 2021 to 1,405 beds in Fiscal 2023 at CAGR of 27.52%, and the occupancy rate of its beds, increased from 41.63% in Fiscal 2021 to 49.97% in Fiscal 2022. In Fiscal 2023, its bed occupancy rate was 45.33% as the Jhansi-Orchha hospital commenced commercial operations in Fiscal 2023 with effect from April 10, 2022 and had a low occupancy rate. While the company invests a significant amount of capital expenditure in creating and increasing bed capacity and opening new hospitals, it strives to incur lower capital expenditure by making optimal use of the available area in its hospitals and working better with equipment suppliers. It has acquired land on a long-term leasehold basis and a building civil structure on its own, which has helped it to keep its capital expenditure per operational bed lower.

Risks and concerns

Operate in industry with high expenses: The company operates in an industry with high expenses such as manpower, infrastructure and medical equipment maintenance and repair costs, ancillary items and pharmaceuticals. Maintenance of highly specialized hospital equipment involves recurring substantial costs. If it is unable to achieve favourable pricing from vendors which is based on negotiations in a very competitive environment or pass on cost increases to the patients, its profitability could be materially and adversely affected. These costs do not significantly vary depending on its revenue generated, and it cannot assure that the levels of its costs will decrease in the future. Furthermore, if it experience an increase in costs, or if it is not able to grow its revenue in line with its costs, its profitability would be severely impacted, particularly during a period of economic decline or in the event of a reduction in its revenues, which could have a material adverse effect on its business, financial condition, cash flows and results of operations.

Highly dependent on doctors, nurses and other healthcare professionals: The company’s performance and growth strategy depends substantially on its ability to attract and retain experienced doctors, nurses and other healthcare professionals in a highly competitive industry. The demand for doctors is highly competitive and the availability of specialist doctors is limited by the significant training period involved. Skilled doctors are in high demand in India, making it difficult to hire and retain senior doctors. It competes with other healthcare providers, including other super-specialty and single-specialty hospital chains, to attract and retain doctors from a limited pool of candidates. The key factors that doctors consider for their place of employment include the reputation of the hospital, the quality of the facilities, the range of specialties offered by the hospital, the quality of medical equipment and the clinical excellence of each specialty, the ability to attract adequate patient load, academic research and skill enhancement opportunities, compensation (subject to local rules and regulations), growth opportunities, management behavior, organizational set-up, goodwill of the organization and relationships with the patients and fellow health and other workers. Other healthcare providers may be perceived more favorably or better than it on one or more of these factors.

Depends on strength of brand and reputation: Despite the company’s effort to manage and supervise healthcare professionals in its network, they may fail to meet its requirements and their contractual obligations with it. They may not possess the permits or qualifications required by the relevant laws and regulations at all times, or they may fail to meet other regulatory requirements for their operations. It could also be the subject of complaints from customers who are dissatisfied with the quality and cost of its services. Its brand and reputation may be adversely impacted if its healthcare professionals provide inferior service, engage in medical malpractice, violate laws or regulations, commit fraud or misappropriate funds, harm a patient or mishandle personal healthcare information, in addition to any impact that such development would have on its business, financial condition, results of operations and prospects. It faces heightened risks of non-compliance with respect to healthcare professionals who do not operate fully under its management and over whom it has limited control.

Rely on third party suppliers and manufacturers: The company sources its equipment and supplies from third party suppliers under various arrangements. Any failure to procure equipment, reagents or drugs on a timely basis, or at all, from such third parties and on commercially suitable terms could affect its ability to provide its services. Certain of its medical and laboratory equipment are also procured under lease agreements. Under some of these agreements, the supplier generally has the discretion to terminate the agreement with a specified period of notice in the event of a breach of any term or condition of the agreement, including but not limited to default in payment of the applicable fee. Any such termination and consequent removal of the installed equipment may adversely affect its operations. In addition, manufacturers may discontinue or recall equipment, reagents or drugs used by it, which could adversely affect its ability to provide its services, and therefore, could adversely affect its business, results of operations and cash flows. It also relies on a limited number of equipment suppliers to carry out repairs and maintenance of its equipment.

Outlook

Yatharth Hospital and Trauma Care Services is a multi-care hospital chain. The company ranks among the top 10 largest private hospitals in the National Capital Region of Delhi. It presently operates three super specialty hospitals situated in Delhi NCR, i.e., at Noida, Greater Noida, and Noida Extension, Uttar Pradesh. Further, Noida Extension Hospital has 450 beds and is one of the largest hospitals around the area. To extend its operations and services, the company acquired a 305-bedded multi-specialty hospital in Orchha, Madhya Pradesh. This too is among the largest hospital in the locality. A team of 370 doctors is engaged with the company. They offer healthcare services across numerous specialties and super specialties. It is empanelled with several of the third-party health insurance administrators and the non-life insurance companies, many government organisations including Employees’ State Insurance Corporation (ESIC), Central Government Health Scheme (CGHS), Ex-Servicemen Contributory Health Scheme (ECHS), as well as public sector undertakings and private enterprises. On the concern side, the company may incur substantial costs in order to comply with current or future laws, rules and regulations, and it may not be able to maintain, at all times, full compliance with such laws, regulations, policies and guidelines. Besides, it may experience delays in getting required approvals, such as for the generation, collection, reception, transport, storage, treatment and disposal of biomedical waste, approval for high tension industrial low tension service connection and the license to sell, stock or exhibit or offer for sale, or distribute certain drugs.

The company is coming out with an IPO of 2,37,44,672 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 285-300 per equity share. The aggregate size of the offer is around Rs 676.72 crore to Rs 712.34 crore based on lower and upper price band respectively. On the financial front, total income increased by 29.94% from Rs 4,025.86 million in Fiscal 2022 to Rs 5,231.00 million in Fiscal 2023. The company has recorded a profit after tax (PAT) for the year of Rs 657.68 million in Fiscal 2023 compared to Rs 441.62 million in Fiscal 2022. Meanwhile, the company is intending to introduce new specialties at its existing hospitals such as radiation therapy to its oncology department at its hospitals located in Noida Extension and Jhansi-Orchha. It also plans to introduce an additional specialty of human organ transplant and intends to develop its Greater Noida hospital as its Organ Transplant centre. The company aims to continue to be one of the leading hospital and medical service providers in the Delhi NCR and North India by expanding its network of hospitals owned and operated by it through brownfield or Greenfield projects, strategic acquisitions and arrangements with third party service providers.