Healthcare Global Enterprises Ltd - IPO

Type
Size
Offer Price
Minimum subscription
Listing
Bid/Issue opens
Bid/Issue closes
Shares on offer
Face Value
Pre/Post-issue promoter holding
Promoters
Lead Managers

Issue Summary
Public Issue, 100% Book building
Rs 6.1 bn to 6.5 bn
Rs 205 to Rs 218 per share
65 shares
BSE and NSE
16-March-2016
18 March, 2016
29.8 m (Fresh issue 11.6 m + Offer for sale of 18.2 m)
Rs 10 per share
28.8% / 24.6%
Dr BS Ajai Kumar, Dr Ganesh Nayak, Dr BS Ramesh,
Dr KS Gopinath, Dr M Gopichand
Kotak Investment Banking, Edelweiss, Goldman
Sachs, IDFC, IIFL and Yes Bank

Objects of the issue

The proceeds from offer will be utilised as below.
Particulars
Purchase of Medical Equipment
Investment in IT software, services and hardware
Pre-payment of debt
Total

Rs m
422.1
301.9
1,470.5
2,194.5

Some of the existing shareholders are selling off their stake and such amount will
go to these shareholders. In the promoter group, Dr BS Ajai Kumar, who holds
major stake among the promoters, will pare some part his stake through the IPO.

Company background
1.

Business

Healthcare Global Enterprises Ltd (HCG) is provider of specialty healthcare

focused on oncology (cancer) and fertility treatments. The company generates
major revenues from operations in India. Under the HCG brand, the company
operates the largest cancer care network in India in terms of total number of
private cancer treatment centers licensed by Atomic Energy Regulatory Board
(AERB). Further under the brand Milann, the company operates its fertility
centers.
The company began the expansion of HCG network in 2006. Since then it has
added 11 comprehensive research centers, three freestanding diagnostic centers
and one-day care chemotherapy center across India as of 31st Dec 2015. Company
has major centers in Tier II and Tier III cities. The company is looking to expand
its presence in Tier I cities in the next couple of years.
2.

Key management personnel

Dr BS Ajai Kumar (Chairman and CEO), aged 64 years, holds a bachelor's degree
in Medicine and Surgery from St. John's Medical College Bengaluru. He
completed his residency in Oncology from the University of Virginia Hospital,
Charlottesville and his residency in Radiotherapy from the University of Texas
System Cancer Centre, MD Anderson Hospital and Tumour Institute, Texas,
United States of America. Mr Ajai Kumar, has been director of the company since
March 2000. He was re-appointed as the CEO with effect from July 2015.
Mr. Krishnan Subramanian (CFO), joined the company in March 2014. He is a
member of the Institute of Cost and Works Accountants of India and a member of
the Institute of Company Secretaries of India. Mr Krishnan has over 20 years of
experience in the field of finance and accounting. Prior to joining the company,
he worked at Fortis and ITC. He is responsible for overseeing the overall accounts,
finance, budgeting, forecasting and compliances across the group.
Dr Mudit Saxena (Chief Operating Officer (COO), for Karnataka, Madhya Pradesh
and Rajasthan), joined the company in April 2012. Mr Saxena has over 14 years of
experience in the field of hospital and administration. Before joining HCG, Mr
Saxena has worked with some leading hospitals in India, like Wockhardt Hospitals,

Fortis, and other medical institutions. At HCG, he is responsible for the operations
in all the cancer units in the above mentioned states.
Dr Bharat Gandhavi (Chief Operating Officer (COO), for Gujarat), is associated
with the company since February 2008. Mr Gandhavi has over 13 years of
experience in the field of hospital and administration. He is responsible for the
operations in all the HCG cancer units as well as a multi-specialty hospital in the
state of Gujarat.

Reasons to apply
1.
2.
3.
4.

Growing chronic ailments

Focus on specialty services
Increasing its presence
Debt of the company to come down

Reasons not to apply

1.
2.
3.
4.
5.
6.

Capital intensive business

Relies on third party financing for its equipment
Payer mix
Past and future financial performance
Frauds, & Liabilities
Comparative valuations & Concluding remarks

HCG's business model is unique when compared to other hospital players in the
sense that its focus is on niche growing therapies. Growth in revenues has been
robust in the last few years. However, the operating margins and the bottomline
growth has remained volatile and subdued too.

Company
Apollo Hospitals
Fortis Healthcare
Narayana Hrudayala
HCG - Pre Issue
HCG - Post Issue

Comparative valuations - FY15

P/E
EV/EBITDA
56
26.72
NA
1.88
NA
NA
920
23.5
795
21.9

P/BV
5.99
43.63
3.79
5.8
3.5

RONW %
10.59
-3.94
1.76
0.5
0.5

Given the company is in a high capital intensive business, the price and earnings
ratio may not give the right picture.
Over and above, major shareholders like Premji investments, India Build Out Fund
and Temasek are selling substantial portion of their holdings. These investors will
also be booking fat profits at the given price band of Rs 205-218.

For more details in report apply/not to apply; drop your email id in

comment.