GPT Healthcare Limited IPO Review

GPT Healthcare is facing an IPO issue of Rs. 525.14 Cr will open on February 22, 2024. The issue will close on February 26 and be listed on the exchange on February 29, 2024. In this article, we will look at GPT Healthcare Limited IPO Review 2024 and analyze its strengths and weaknesses. Read on to find out!

GPT HEALTHCARE LIMITED.

About Us

GPT Healthcare is a regional healthcare operator in eastern India. The company operates a chain of mid-sized, full-service hospitals under the ILS brand and provides integrated healthcare services.

As of September 2023, the company operates four hospitals in eastern India, three of which are in West Bengal and one in Tripura. These four hospitals have a total of 561 beds and provide medical services across 35 specialties.

The company was founded by promoter Dr. Founded and managed by Om Tantia. He has over 40 years of experience as a medical practitioner and founded ILS Hospital in 2000.

The company is strategically focused on gaining a presence in the relatively underpenetrated healthcare market in eastern India. Hospitals in West Bengal are located in densely populated areas of Kolkata and Howrah, enabling them to maintain high occupancy rates throughout the year.

In terms of specialization, GPT has a very diverse portfolio across internal medicine, diabetology, laparoscopy, general surgery, kidney transplantation, orthopedics and joint replacement.

Industry introduction

According to the Global Health Expenditure Database compiled by WHO, India’s health expenditure in 2021 was 3.3% of GDP. As of 2021, India’s health spending as a percentage of GDP lags behind developing countries such as Brazil, Vietnam, Sri Lanka, and Malaysia.

Public spending on health services in India is still much lower compared to global countries. For example, India’s total per capita health spending (in international dollars, adjusted for purchasing power parity) was only $74.0 in 2021 compared to $12,012 in the United States. Personal medical expenses increased from 5 million won to 10 million won. 1.81Lakh Cr to Rs. 4.1Lakh Cr in FY21-22 was supported by increase in government schemes, health expenditure in the country, increase in income levels and increase in disease incidence.

At a regional level, South India has 17.3 doctors per 10,000 population, which is the highest at a regional scale. West India, North India and North East India have approximately 11.5, 5.3 and 6.9 doctors per 10,000 people. In eastern India, where GPT is located, there are only 5 doctors, 12.7 nurses and 7 hospital beds per 10,000 people. Eastern India, a densely populated region with low access to appropriate healthcare, is an opportunity for GPT Healthcare.

GPT Healthcare – Finance

GPT Healthcare’s operating revenue grew by just 7% at Rs. 337 Cr in FY22 to Rs. 361 Cr in FY23. Since FY21, revenue has increased from Rs. 243 Cr growing at 22% CAGR. GPT’s half year performance was quite strong with revenue up 19% from Rs. 172 Cr in H2FY23 to Rs. 204 Cr for FY 2024.

Along with the slowdown in revenue growth, GPT Healthcare’s net profit declined 6.4% from Rs. 42 Cr in FY22 to Rs. 39 Cr in FY23. The decrease in net profit increased by 100 million won due to an increase in employee welfare costs. 17%, and other expenses increased 22%. Physician payments, which account for 65% of other costs, increased 28% during the same period, resulting in a decrease in net profit. As of the half year, net profit increased by 38% to 50 billion won. 17 Cr in H2FY23 to Rs. 23.5 Cr in H2FY24.

GPT Healthcare – Key Players

When we look at how GPT compares to its listed peers, we see that GPT is the smallest healthcare organization by revenue. Due to its low debt capital structure, GPT has a strong return on equity of 23.77%, which is higher than the median ROE of 18% for its listed peers.

In terms of price-to-earnings ratio, GPT is at the upper end of its price range of Rs. 186 and FY23 underlying EPS of 4.88 is valued at 38.11 times earnings per share. Although this P/E appears high compared to other listed companies, it is still lower than the industry average of 49x calculated for the listed companies below.

Company Strengths

1. Key regional locations: The company has established a strategic presence across the highly populated but low penetration markets of eastern India.
2. Asset lighting model: GPT operates its hospitals under an asset-light model, signing long-term leases with landlords to set up hospitals. This frees up Capex for further expansion.
3. A variety of professional mixes: GPT operates a multispecialty hospital, providing services to a variety of specialties, but each specialty does not account for more than 20% of its revenue.
4. ARPOB increase: The average profit per operating room increased from 10 million won to 10 million won. 24,681 in FY21 to Rs. As of September 2023, there are 32,979 people.
5. Professional Manager: The company is run by its founder and promoter, who has 40 years of experience in the healthcare industry. He also has a deep understanding of the healthcare market in eastern India.

company’s weaknesses

1. Revenue Concentration: Three out of the four hospitals operated by the company are in the state of West Bengal. These hospitals generate 70% of revenue, so there is a risk of revenue concentration. Additionally, all hospitals are located in eastern India.
2. Reliance on multi-specialty care: The company generates nearly 90% of its revenue from specialty treatments such as diabetology, nephrology, laparoscopy, etc. Reduced demand for these specialty treatments could have a significant impact on your bottom line.
3. Low Bed Capacity: Compared to competitors Global Health, KIMS, and Jupiter Life Line Hospital, the bed occupancy rates are 60%, 73%, and 62%, respectively. GPT Healthcare’s bed occupancy rate remains slightly low at 60%.
4. Concerns about bad debt: The company is having difficulty converting trade receivables into non-performing loans because 8.52% of trade receivables were bad debts as of September 2023. This rate has increased significantly from 5.64% in FY21.

GPT Healthcare – GMP

As of the writing of this article, the gray market premium for the stock was GPT Healthcare, which has not yet been disclosed. We will update the article with our respective expectations as soon as GMP is updated.

Key information

promoter: GPT Sons Pvt Ltd, Dwarka Prasad Tantia Dr. Om Tantia and Shri Gopal Tantia

Book Operations Lead Manager: JM Financial Co., Ltd.

Proposal registered by: Link Intime India Pvt Ltd

purpose of the problem

1. Of the proceeds from the rupee issuance, 30 Cr will be used to repay the company’s borrowings and other outstanding balances.
2. Any remaining proceeds will be used for general corporate purposes.

conclusion

GPT Healthcare is a regional healthcare provider focused on underserved markets in eastern India. The company operates an asset-light model and its hospitals treat a variety of specialty problems.

It is still a very small hospital chain with more room for growth. It could benefit from taking on more debt and expanding to seek better opportunities in eastern India. On the financial side, sales growth figures and declining profitability in recent years should raise concerns among investors.

Although it showed much stronger growth in the first half of FY24, investors should track GPT’s ability to scale quickly to remain competitive among its peers. In conclusion, GPT Healthcare is an asset-light hospital business with ROE and ROCE of 24% and 26%, respectively, and a price-to-earnings ratio of 38x. Do you think it’s worth applying for an IPO? What are your thoughts? Let us know in the comments below.

Written by Nasir Hussein

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