Aprameya Engineering coming with IPO to raise Rs 29.23 crore

Aprameya Engineering

• Aprameya Engineering is coming out with initial public offering (IPO) of 50,40,000 shares in a price band Rs 56-58 per equity share.
• The issue will open on July 25, 2024 and will close on July 29, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 5.60 times of its face value on the lower side and 5.80 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Sanjoly Alkesh Jalan.

Profile of the company

The company is engaged in the business of installation, set up & maintenance of Intensive Care Units (ICU), Neonatal Intensive Care Units (NICU), Pediatric Intensive Care Units (PICU), Operation Theatre, dialysis centres and prefabricated structure ward in the hospitals and medical care centres on turnkey basis along with supply of high value healthcare equipment and diagnostic equipment to private hospitals, Government hospitals and medical practitioners. Over the years, on the basis of its knowledge and understanding of the requirements of medical practitioners, industry standards and utility of the medical equipment, it has evolved ourselves and developed its capabilities in offering solutions in the field of healthcare services relating to ICU set up, dialysis centres setup, operation theatre setup and providing medical equipment for easing operation related to patient treatment, monitoring and diagnosis by hospitals, medical practitioners and diagnostic service providers. The company is engaged in the business of setting up of medical, healthcare infrastructure, supply of consumables, trading of medical and healthcare equipment’s and maintenance of the equipment supplied and installed by the company. Further, the company has many times received commission from the equipment suppliers for supply of the medical equipment directly to the customers.

The company started the business as a partnership firm on September 05, 2003 and has grown its business with the objective of delivering healthcare solutions focused on cost effectiveness and improved accessibility. It is engaged in selling of high value medical equipment as a dealer of medical equipment manufacturers and suppliers such as Johnson & Johnson, Stryker India and many other medical equipment manufacturers. Apart from these companies it also has established cordial relationship with medical device manufacturers like Alan Electronic Systems, Draeger Medical India, Siemens Healthcare, Schiller Healthcare India, Epsilon, Resmed and many other medical devices manufacturers and suppliers for easy and timely procurement. With the knowledge and experience of over one & half decade in delivering the medical devices for patient care at reasonable outlay, it has during the year 2020 expanded its business activity by providing turnkey healthcare infrastructure solution by setting-up of ICU, NICU, PICU, operation theater projects and prefabricated structure ward on turnkey basis. Further, during the year 2024, it has undertaken setting up, installing and commissioning of dialysis centres across the state of Rajasthan.

Proceed is being used for:

• Meeting incremental working capital requirements (including augmentation on Long Term Working Capital).
• General corporate purpose.

Industry Overview

Healthcare has become one of India's largest sectors, both in terms of revenue and employment. The industry is growing at a tremendous pace owing to its strengthening coverage, service and increasing expenditure by public as well private players. Between 2016–22, the market is expected to record a CAGR of 22.52%. The total industry size is estimated to reach $ 372 billion by 2022. The e-health market size is estimated to reach $ 10.6 billion by 2025. In November 2021, the Government of India, the Government of Meghalaya and the World Bank signed a $ 40 million health project for the state of Meghalaya. This project will improve the quality of health services and strengthen the state’s capacity to handle future health emergencies, including the COVID-19 pandemic. This is due to rising income, easier access to high-quality healthcare facilities and greater awareness of personal health and hygiene. Greater penetration of health insurance aided the rise in healthcare spending, a trend likely to intensify in the coming decade. Economic prosperity is driving the improvement in affordability for generic drugs in the market. 

The budgeted spending on the health sector by the federal and state governments was 2.1% of Gross Domestic Production (GDP) in FY23 and 2.2% in FY22, up from 1.6% in FY21. The Government is planning to increase public health spending to 2.5% of the country's GDP by 2025. India’s medical educational infrastructure has grown rapidly in the last few decades. By FY22, Indian healthcare infrastructure is expected to reach $349.1 billion. As of May 2023, the number medical colleges in India stood at 654. The number of allopathic doctors, with recognised medical qualifications (under the I.M.C Act), registered with state medical councils/national medical council increased to 1.3 million in June 2022, from 0.83 million in 2010. As per information provided to the Lok Sabha by the Minister of Health & Family Welfare, Dr. Bharati Pravin Pawar, the doctor population ratio in the country is 1:834, assuming 80% availability of 12.68 lakh registered allopathic doctors and 5.65 lakh AYUSH doctors. Multinational healthcare company Abbott has committed to converting 75 Primary Health Centers (PHCs) to Health and Wellness Centers (HWCs) in nine Indian States, in collaboration with Americares India Foundation, a nonprofit organisation dedicated to relief and development in the field of health. This will benefit over 2.5 million people from under-resourced communities every year.

Pros and strengths

Rapid growth in the business with focus on setting up of healthcare infrastructure: The company has over 20 years of experience in the field of providing solutions through dealing in medical and healthcare equipment. It has entered into distributor and service agreement with medical devices suppliers. Apart from these companies it also has established sound business relationship with medical device manufacturers and suppliers. Initially, it started its business with dealing in high value medical equipment, later with the insight of its promoters and the experience from the medical industry, it enhances its capabilities and started work related to installation and setting up of ICU, PICU, NICU, dialysis centres, Operation theater and prefabricated structure ward on turnkey basis which involve varying degrees of complexity. Since 2020, it has executed installation of around 2000 critical care beds including Intensive Care Units (ICU), Neonatal Intensive Care Units (NICU), Pediatric Intensive Care Units (PICU) and operation theatre. Further, during the Fiscal year 2024, it has undertaken setting up, installing and commissioning of dialysis centres for Rajasthan Services Medical Corporation in the state of Rajasthan.

Wide customer base including many Private and Government Hospital /Medical college: The company focuses on maintaining long term cordial business relationship with most of its customers. Its customers majorly include various private hospitals, government hospitals, medical practitioners, medical colleges including AIIMS and diagnostic centres across the country. Further, based on the successful turnkey projects undertaken by the company, it has established relationship with its customers which includes various government hospitals and medical colleges in Rajasthan like Dr. S N Medical College- Jodhpur, Government Medical College - Kota, RMSCL - Jaipur, RNT Medical College - Udaipur and SMS Medical College –Jaipur. The company value its relationships with its customers, which has enabled it to deepen its relationship with its customers and effort to become their preferred suppliers. Its motivated team of personnel and its work processes complement each other to enable it to deliver client satisfaction by delivering quality work and timely execution of projects. 

Firm arrangement with many medical equipment suppliers and manufacturers: One of the critical factors to grow and develop in the company’s business is the ability to source high value healthcare equipment. The company has entered into distributorship arrangements with medical equipment suppliers such as Johnson & Johnson Private Limited, Stryker India Private Limited etc. Apart from these companies it also has established cordial relationship with many other medical device manufacturers like Draeger Medical India Private Limited, Alan Electronic Systems Pvt Ltd, Siemens Healthcare Private Limited, Schiller Healthcare India Private Limited, Epsilon, Resmed etc. Based on this relationship which it has developed with its suppliers for supply of high value medical equipment, the company can address the requirement of customers properly with cost efficiency while adhering proper quality as well as technical parameters of equipment. For its healthcare infrastructure business also, it needs medical equipment within the specified timeframe and budget cost to meet the proposed project timeline and costing. It has over the years developed cordial relationships with its equipment suppliers which enable it to obtain medical equipment at reasonable rates within the prescribed timelines, which are beneficial to it.

Risks and concerns

Face risks relating to sourcing medical equipment’s from third parties: The company deals in variety of medical equipment used by the medical practitioners, hospital and diagnostic service providers. The major components it deals in includes Electrosurgical Generator, Electrosurgical Unit, CO2 Insufflator, LED Surgery Light, Surgical & Medical Examination Light, ICU Respiratory Monitoring System, ICU Ventilation System, Anesthesia Workstation, Jaundice Meter, Anesthesia Machine, Harmonic Scalpel etc. It has entered into distributorship agreement with medical equipment suppliers such as Johnson & Johnson Private Limited, Stryker India Private Limited etc. Apart from these companies it also has established cordial relationship with many medical device manufacturers like Draeger Medical India Private Limited, Siemens Healthcare Private Limited, Schiller Healthcare India Private Limited, Epsilon, Resmed and many other medical devices manufacturers and suppliers for easy and timely procurement. It does not currently have long term contracts or exclusive supply arrangements with some of its suppliers and it purchase the medical equipment from them on requirement basis. Although it has not encountered any significant disruptions in the sourcing of any medical equipment, it cannot assure that such disruptions will not occur and/or it shall continue to be able to source the equipment in a cost-effective manner.

Many of work orders awarded primarily through competitive bidding processes: The company derives a portion of its revenue from contracts awarded by State governments in India. These contracts are typically awarded to it through a competitive bidding process, and are subject to the satisfaction of certain eligibility conditions and performance standards. These include prior experience in the business, market standing and availability of financial resources. Further, once prospective bidders satisfy the pre-qualification requirements of the tender, contracts are usually awarded based on the quote by the prospective bidder. Though it has satisfied the pre-qualification criteria to bid for contracts in the past, there can be no assurance that it will be able to meet such criteria to bid for such contracts in the future. In addition, government conducted tender processes may be subject to change in qualification criteria, unexpected delays, modifications, cancellations, withdrawals and uncertainties. Terms of contracts procured under the tender process may not prove to be optimally beneficial for it. In the event that new contracts are announced and there are changes in the qualification criteria such that it is unable to qualify or even if the company meets the qualification criteria, it may not meet the financial criteria and fail to qualify for selection, its business, prospects, financial condition, cash flows and results of operations may be adversely affected. 

Depend significantly on customer: The company depend significantly on customers in the healthcare infrastructure industry. Any reduction in the spending by the customers or the government in the field of healthcare infrastructure development could materially and adversely affect its business, financial condition and results of operations. This rise was mainly on account of an increase in the turnkey projects undertaken by the company. As a result of its dependence on customers in the government sector, it is exposed to fluctuations in the business from the government entities which directly depends on the budgetary fund allocation and spending of the Government in the development of healthcare infrastructure. Further, its operations involve extending credit to its customers, further many of its customers includes government agencies and consequently, it faces the risk of the uncertainty regarding the delay in receipt of these outstanding amounts. The payments from government entities may be, subject to delays, due to regulatory scrutiny and procedural formalities.

Outlook

Aprameya Engineering working in key area of Turnkey project solution for various operation theater just like Turnkey Project for Modular OT, Turnkey Project for ICU, NICU, CCU and Prefabricated Project. Also, Hospital Design, Equipment Procure, supply and Commissioning & installation Planning are other key work area of this main segment. for that the service is playing a vital role after sales service equipment. The intensity of commitment of the company towards service support is reflected by the company’s most competent and easily accessible service hierarchy, which has made it the most trustworthy player in healthcare industry and organization of utmost choice. It has surpassingly evolved service department to support after sales services and maintenance. Service and maintenance are performed by engineers with higher technical education and certified by manufacturers. Its field team, skilled technicians, are ready to perform installation, maintenance and warranty service for all the equipment delivered by the company. It is also privileged to leverage its services in various categories of government tenders from the department of Directorate of Medical & Health services/Health and Family Welfare within Gujrat, Rajasthan and Delhi. On the concern side, under the ICU, dialysis centres and operation theatre setup business, the company is subjected to adherence with the quality standards like placement of critical care beds, minimum requirement with regards to the availability of medical and diagnostic device required for treatment of patients, as imposed by the industry practices and its customers. Any failure by it to achieve or maintain compliance with these requirements or standards may adversely affect its ability to deliver the services to its customers.

The company is coming out with a maiden IPO of 50,40,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 56-58 per equity share. The aggregate size of the offer is around Rs 28.22 crore to Rs 29.23 crore based on lower and upper price band respectively. On performance front, the company’s total income has decreased significantly by 16.23% to Rs 6562.22 lakh in Fiscal 2024 from Rs 7833.35 lakh in Fiscal 2023. The company has recorded significant decreased of 35.62% in profit after tax from Rs 536.92 lakh in Fiscal 2023 as compared to Rs 345.66 lakh in Fiscal 2024. Meanwhile, the company intends to strengthen its presence all over the country and play a bigger role as the government is focusing to substantially increase the scope of medical facilities. In pursuing its strategies, it seeks to identify markets which it can access and can provide cost and operational advantages to its clients and distinguish itself from other competitors. Going forward, it intends to identify and participate in new opportunities in the medical infrastructure space and execute those projects which could strengthen its market position.