GPT Healthcare IPO opens today: Should you subscribe to the issue?

The initial public offering (IPO) of GPT Healthcare will open for public bidding on Thursday, February 22. The issue, which will conclude on Monday, February 26, is being sold in the fixed price band of Rs 177-186 apiece with a lot size of 80 equity shares and its multiples thereafter. The asking valuations leave little on the table and a couple of brokerages have suggested ‘subscribe’ on the issue but for a long-term basis, citing strong foothold in the dense Eastern market, operational performance, track record and decent financials.

Others have suggested investors to skip the issue citing its rich valuations, high concentration of revenue, lower bed occupancy and attrition of healthcare professionals.

GPT Healthcare operates a chain of mid-sized full-service hospitals and provides integrated healthcare services, with a focus on secondary and tertiary care. Going ahead, the company intends to strengthen its existing hospitals by further balancing specialty mix, deepening its expertise in selective specialties and adding new specialties and services, said Anand Rathi Research.

"At the upper price band, the company is valuing at P/E of 39.1 times with a market cap of Rs 1,526.2 crore post issue of equity shares and return on net worth of 23.7 per cent in FY23. On the valuation front, we believe that the company is fairly priced. Thus, we recommend an 'subscribe for long term' rating to the IPO," it said.

The company is yet to expand its operations successfully to other parts of India. The bed occupancy rates need to improve to reflect better financial performance, said StoxBox. "We recommend an 'avoid' rating for the issue. However, we would reassess the company on improvement in financial metrics over a sustained period," it added.

GPT Healthcare is looking to raise Rs 525.14 crore via IPO, which includes a fesh share sale of Rs 40 crore and offer-for-sale (OFS) of up to 2.60 crore equity shares by BanyanTree Growth Capital II. The net proceeds from the issue shall be utilized towards repayment or prepayment of certain outstanding borrowings availed by the company and general corporate purposes.

Incorporated in 1989, the Kolkata-based GPT Healthcare operates a chain of mid-sized, multi-specialty, full-service hospitals in Eastern India under the ILS Hospitals brand, providing integrated healthcare services focusing on secondary and tertiary care. It has four hospitals of which two are located in Kolkata, one in Howrah and one in Agartala (Tripura).

Given its healthy regional presence in Eastern India and strategically situated hospitals offering a comprehensive array of medical specialties, GPT Healthcare is positioned to seize opportunities in underserved healthcare markets and strategically growing in the adjacent markets with asset-light business models like Ranchi, said Mehta Equities' IPO note.

"Investors should also look at IPO offer, which come with a 100 per cent OFS issue, which is an area of concern for new investors. Hence, considering all parameters we recommend only high risk investors can 'subscribe' to the IPO for the long term while conservative investors can wait and watch the stock post listing," he said.

The company offers a range of healthcare services in over 35 specialties and super-specialties, including internal medicine and diabetology, nephrology, laparoscopic and general surgery, gynaecology and obstetrics, intensive care, gastroenterology, orthopaedics and joint replacement, interventional cardiology, neurology, neurosurgery, paediatrics, and neonatology.

With an established presence in Eastern India across various healthcare verticals they cater to diverse economic segments, offering comprehensive services from primary to tertiary care, serving as a one-stop destination for patient needs, said Arihant Capital Markets, which has a subscribe rating on the issue.

GPT Healthcare is a key regional corporate healthcare company with a strong foothold in the under-penetrated and densely populated healthcare delivery market; well diversified specialty mix and location mix; ability to attract, train and retain quality medical professionals. said Hensex Securities. "We suggest a ‘Subscribe’ to the issue with a long term investment perspective," it said.

Hensex Securities has flagged 70 per cent of revenue coming from West Bengal and skilled healthcare talent retention as key concern for the company. Arihant Capital markets has added land lease contracts, lower bed occupancy rate and maintenance of quality services as the key risks for the company.

GPT Healthcare has reserved 50 per cent of the net offer for qualified institutional investors (QIBs), while non-institutional investors (NIIs) will have 15 per cent of shares reserved for them. Retail investors will have 35 per cent of the net issue reserved for them.

JM Financial is the sole book running lead manager of the GPT Healthcare IPO, while Link Intime India is the registrar for the issue. Shares of the company are set to be listed at both BSE and NSE with Friday, February 29 as the tentative date of listing of the shares.
 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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