Will Yatharth Hospital debut with decent double-digit premium on August 7?

Subscriptions to Yatharth Hospital & Trauma Care Services' initial public offering (IPO) were overwhelmingly positive, suggesting that the company will begin trading at a significant premium to its issue price of Rs 300 per share. This is because the hospital group has established itself as Delhi NCR's preeminent super speciality provider, thanks to its many available specialties, robust payer mix, and steady operational and financial expansion.

Investors responded well to the Rs 687-crore public offering, subscribing 36.16 times from July 26-28. The offer received strong backing from investors, with qualified institutional investors purchasing 85.10 times their quota and high net worth people bidding 37.22 times theirs and regular investors bidding 8.34 times theirs.

"Following a strong subscription to the issue, Yatharth Hospital is likely to make a decent listing on the bourses on Monday," said Prathamesh Masdekar, research analyst at StoxBox.

As a result of the company's concentrated presence in the NCR region, its varied specialisation and payer mix, and the positive sectors tailwinds, he anticipates that the share price will list at around Rs 300, a premium of around 20% over the issue price.

At the end of FY23, the Noida-based multi-care hospital chain had 1,405 beds with 609 doctors, up from 864 beds in FY21 (a CAGR of 27.5%). This was due to the addition of three super speciality hospitals in Delhi NCR and one multi-specialty hospital in Madhya Pradesh.

The operational and financial success of Yatharth Hospital has been consistent throughout the past few years. For the fiscal year ending in March of FY23, profits increased by 49% to Rs 65.8 crore, revenues increased by 31% to Rs 520.3 crore, and EBITDA increased by 21% to Rs 133.8 crore. However, margins shrank from 27.64% to 25.76%.

During the same time period, the company's income per OPD patient rose from Rs 1,669.22 to Rs 2,074.01.

On the back of reasonable ask valuations and healthy margins when compared to peers, Astha Jain, senior research analyst at Hem Securities, and Prashanth Tapse, analyst and senior VP of research at Mehta Equities, both expect a healthy 20-25 percent listing gains for Yatharth Hospital. Analysts' optimism is fueled in part by Yatharth's ambitions for future growth that include expanding into the medical tourism market.

Tapse thinks that following the IPO, Yatharth's bottom line would grow even more because the company will no longer have any debt.

A total of Rs 490 crore was raised in a new issue, while another Rs 196.55 crore was raised through an offer for sale by the promoters.

The company plans to invest the proceeds from the new issuance on debt reduction, hospital capital improvements, and inorganic expansion.