Inventurus Knowledge Solutions coming with IPO to raise upto Rs 2,498 crore

Inventurus Knowledge Solutions

• Inventurus Knowledge Solutions is coming out with a 100% book building; initial public offering (IPO) of 1,87,95,510 shares of Rs 1 each in a price band Rs 1265 - Rs 1329 per equity share.
• Not more than 75% 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 10% for the retail investors.
• The issue will open for subscription on December 12, 2024 and will close on December 16, 2024.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 1 and is priced 1265 times of its face value on the lower side and 1329 times on the higher side.
• Book running lead managers to the issue are ICICI Securities, Jefferies India, JM Financial, J.P. Morgan India and Nomura Financial Advisory and Securities (India).
• Compliance Officer for the issue is Sameer Chavan.

Profile of the company

Inventurus Knowledge Solutions (IKS Health) is a technology-enabled healthcare solutions provider and offer a care enablement platform assisting physician enterprises in the US, Canada and Australia, with a focus on the US markets. The company is a partner for outpatient and inpatient care organizations, enabling healthcare organizations deliver superior clinical care, improve population health outcomes, and transition to the “fee for value” model while optimizing their revenue and reducing operating costs. With the evolution and consolidation of the healthcare industry, it provides solutions that address these increasing tasks, or 'chores', and enable healthcare delivery enterprises to focus on their core focus of healthcare, by taking over chores that are necessary to manage their business. It does this through a blend of pragmatic technology and global human capital, with the aim of enabling healthcare delivery enterprises deliver better, safer and cost-effective care. 

The company offers a comprehensive platform that enables healthcare enterprises across outpatient and inpatient care. Outpatient service facilities, also known as ambulatory care, provide medical care without requiring admission to a hospital or other facility, and include observation, consultation, diagnosis, rehabilitation, intervention, and treatment services. Inpatient care, refers to the provision of medical treatment for patients who have been admitted to a hospital or medical facility, requiring an overnight stay or an extended duration.

As of September 30, 2024, the company has 778 healthcare organizations as its clients, including health systems, academic medical centres, multi-specialty medical groups, single-specialty medical groups, ancillary healthcare organizations and other outpatient and inpatient healthcare delivery organizations. Some of its key clients include Mass General Brigham Inc., Texas Health Care PLLC, and The GI Alliance Management. The company serves its clients through its consolidated globalized workforce of over 13,528 employees, including 2,612 clinically-trained employees and a consultative sales force with presence in key geographies in the US, Canada and Australia, as of September 30, 2024. 

Proceed is being used for:

• Carry out the Offer for Sale of Equity Shares of face value of Rs 1 each by the Selling Shareholders
• Achieving the benefits of listing the Equity Shares on the Stock Exchanges 

Industry Overview

The U.S. healthcare landscape has witnessed significant shifts in hospital expenditures and insurance dynamics. From 2019 to 2023, hospital expenditures grew at a robust average of 5.7% annually, with projections indicating a slight moderation to a 5.1% CAGR through 2028. Insurance trends reveal a nuanced picture: Medicaid expenditure surged at a 7.2% CAGR over the past four years, outpacing the overall health insurance spend growth of 6%. However, the future trajectory suggests a pivotal change, with Medicare expenditures expected to take the lead, growing at 6.8% annually and surpassing other insurance categories. Physician and Clinical Expenditures grew at a robust 5.7% annually from 2019 to 2023, with projections suggesting a slight deceleration to a 5.1% CAGR through 2028. In the insurance landscape, Medicaid expenditure surged at an impressive 8.5% CAGR over the past four years, closely followed by Medicare at 6.9%, both outpacing the overall health insurance spend growth of 6.3%. Looking ahead, Medicare is expected to maintain its growth trajectory at 6.6%, while Medicaid growth is anticipated to slow considerably to 3.3%. Notably, third-party payer programs, which previously grew at a modest 2.7% until 2023, are projected to nearly double their growth rate to a 5% CAGR through 2028, indicating a significant shift in the healthcare financing landscape.

In the ever-evolving landscape of U.S. healthcare, the dichotomy between Inpatient Care and Outpatient Services plays a pivotal role. Inpatient care, characterized by hospital stays for intensive medical attention, contrasts with the dynamic Outpatient segment, emphasizing outpatient services for more flexible and cost-effective healthcare. The industry's notable shift towards Outpatient services reflects a broader trend of prioritizing accessible, patient-centric care outside traditional hospital settings. Improved access in outpatient care leads to significant downstream revenues for acute care facilities and helps unlock the value of an employed physician medical group for health systems. This transformation underscores a fundamental change in healthcare delivery, recognizing the importance of meeting patient needs beyond the confines of traditional hospital settings while simultaneously capitalizing on the economic benefits of enhanced outpatient care access for acute care facilities

Further, the outsourced services market in the technology-enabled healthcare provider space is growing rapidly as providers seek to boost efficiency and streamline operations. By leveraging technology-enabled service providers to handle workflows like billing, revenue cycle management, patient engagement, and data analytics, healthcare organizations can focus on core patient care activities and achieve higher quality care while maintaining operational excellence. Going forward, the various segments within provider-enabled technology solutions - such as Revenue Cycle Management, Clinical Services, Value-Based Care, Scribe and Transcription Solutions, and Coding Services - demonstrate robust growth and significant market potential, with an overall projected CAGR of 11.7% from 2023 to 2028.

Pros and strengths

Comprehensive one-stop platform with diversified offerings: The company is focused on providing a comprehensive enablement platform that cater to the needs of a wide spectrum of healthcare organizations, across the breadth of outpatient and inpatient care value chain under a single platform. Healthcare facilities incur huge costs in vendor management process such as searching and evaluating vendors, signing large and complex contracts, establishing information technology connectivity, compliance reviews, and contract administration, among others. A fragmented platform also leads to lack of accountability across the patient journey, where healthcare organizations also perform the role of the system integrator, leading to suboptimal or inaccurate outcomes. It considers its ability to offer a comprehensive one-stop platform offering an integrated solution instead of multiple point solutions, a key strength of its business, which allows its clients to avoid having to contact and manage several vendors servicing segregated and disparate aspects of the organization.

Leveraging digital evolution, transformation and automation technologies: Since inception, the company has gained experience in leveraging next-generation technologies that drive its ability to provide solutions for digital evolution, transformation and automation. In its experience, its solution capabilities enable its clients to get greater returns from their existing technology investments. Over the years, the company has created complementary technologies across its clients’ financial, operational, and clinical value chains to enhance outcomes. These platform-based technology solutions integrate with its clients’ practices and EHR systems to help reduce administrative and clinical burden, offer actionable insights, deliver process excellence, and enhance project team communications.

Strong brand driven by clinical thought leadership through IKS Advisory Board: The company improved its brand recognition within the industry through its IKS Advisory Board, a healthcare industry leadership forum which invites leaders of healthcare organizations, physician leaders, and other senior executives from healthcare organizations in the US, for a biennial gathering to review key trends impacting the healthcare industry, provide feedback on its new product offerings, advise it on key strategic initiatives, and assist it with recruiting senior executives. It has built its brand through selective marketing campaigns, participation in healthcare industry events, and public relations initiatives.

Sustainable and scalable business model: The company has adopted a sustainable and scalable engagement model which allows greater flexibility and cost-savings in the implementation and integration of its solutions across various organisational sizes and scale. It has over 15 years of experience in partnering with healthcare organizations to provide robust delivery infrastructure for their rapid growth. Its clients include large health systems that require delivery partners such as itself who possess the capabilities, resources, and expertise to set up, manage, and scale large delivery organizations to meet their complex and demanding requirements. Its model enables clients to hire new physicians, open new clinics, or acquire new medical groups, with the assurance that it has the capabilities to support their expansion needs in a seamless plug-and-play manner, allowing them to focus on growing their business, rather than investing capital or deploying management bandwidth to meet their internal administrative, clinical, technological needs.

Risks and concerns

Maximum revenue comes from limited clients: The company’s revenues have been concentrated among a limited number of clients. In the six months ended September 30, 2024 and 2023 and in Fiscal 2024, 2023 and 2022, revenue from its top 10 clients was Rs 4,412.01 million, Rs 4,121.85 million, Rs 7,936.51 million, Rs 6,918.67 million and Rs 5,204.99 million and accounted for 34.39%, 65.34%, 43.66%, 67.09% and 68.16% of its revenue from operations, respectively. The loss of any of these clients could reduce its revenues and may adversely impact its business, financial condition, results of operations, cash flows and prospects.

High attrition rates: The company has high attrition rates and its attrition rate was 14.45%, 24.68%, 44.50%, 54.47% and 54.33% in the six months ended September 30, 2024 and 2023 and in Fiscals 2024, 2023 and 2022, respectively. The company is dependent on its ability to recruit, retain skilled personnel and develop talent. In Fiscal 2024, 2023 and 2022, its employee benefit expenses were Rs 9,618.86 million, Rs 4,915.52 million and Rs 3,734.72 million and accounted for 67.92%, 73.38% and 75.27% of its total expenses in such periods, respectively. The company’s labor costs could be negatively impacted by competition for staffing, the shortage of experienced personnel and labor union activity. 

Geographical constrain: The company is primarily operating in the United States market with offices in different jurisdictions, subject it to regulatory, economic and political risks and competition from several jurisdictions. For instance, to comply with regulatory requirements in the United States, it had to realign its coding services to comply with the International Classification of Diseases (ICD) - 10 coding rules issued by US government’s Centers for Medicare and Medicaid Services (CMS) in 2015; and the scope of its IKS Stacks (Clinical Data Abstraction) service is partially influenced by the Physician Quality Reporting System (PQRS) launched by CMS. The company is subject to the risks of sector and geographic concentration.

Stiff competition: While the company offers a comprehensive suite of healthcare solutions that span the entire value chain, distinguishing it from other players in the sector, it competes in certain areas with large healthcare technology vendors, large “semi-captive” revenue cycle vendors that derive the bulk of their revenue from their health system parent companies, the new technology companies, and with the in-house divisions of its client organizations. It faces competition from different players, including specialized healthcare IT vendors, EHR companies expanding their service offerings, and big tech firms entering the healthcare space. In areas like clinical coding and revenue cycle management, it competes with both domestic and offshore service providers, necessitating continuous innovation and value demonstration to maintain market share. It may be unable to compete effectively or grow as its Indiabased employees are unable to use or access data from these systems, and it is unable to interface its technology systems with these in-house systems.

Outlook

Inventurus Knowledge Solutions provides services to healthcare enterprises such as handling administrative chores/work. The company helps doctors and other healthcare providers by handling their paperwork and administrative tasks. IKS Health offers services such as clinical support, medical documentation management, virtual medical scribing and more. It provides comprehensive one-stop platform with diversified offerings across the outpatient and inpatient care value chain serving key stakeholders such as patients, physicians, nurses and healthcare organizations. On the concern side, the company’s revenues have historically been concentrated among a limited number of clients. The loss of any of the clients could reduce its revenues and may adversely impact its business, financial condition, results of operations, cash flows and prospects. The company’s revenues are primarily dependent on revenue generated from healthcare organizations based in the United States, and as a result, it is subject to the risks of sector and geographic concentration.

The company is coming out with a maiden IPO of 1,87,95,510 equity shares of Rs 1 each. The issue has been offered in a price band of Rs 1265-1329 per equity share. The aggregate size of the offer is around Rs 2377.63 crore to Rs 2497.92 crore based on lower and upper price band respectively. On performance front, the revenue from operations increased by 76.28% from Rs 10,313.00 million in Fiscal 2023 to Rs 18,179.28 million in Fiscal 2024, primarily on account of continued growth in revenues from existing clients and addition of new clients. Moreover, the company recorded a restated profit for the year of Rs 3,704.86 million in Fiscal 2024 compared to restated profit for the year of Rs 3,052.28 million in Fiscal 2023.

The company served 778 US-based healthcare organizations, including health systems, academic medical centres, multi-specialty medical groups, single-specialty medical groups, ancillary healthcare organizations and other outpatient healthcare delivery organizations. Going forward, it will aim to target a number of enterprise clients, typically large healthcare organizations with a substantial pool of employed physicians and other physicians, which leverages on the economies of scale as the cost of acquiring and servicing large and mid-sized clients as a percentage of the revenue generated is lower. Further, the opportunity for revenue growth from large clients is higher, which may increase their demand for its solutions.