IPO investments based on GMP is risky

The latest GMP for Global Health Ltd IPO is Rs 15(+/-). What is your take on this IPO? Should I apply?

- T Venkata Reddy, Tirupati

GMP (Grey market premium) has become a trendy buzzword these days. Refrain from considering GMP while investing in IPOs for the long term. It would be best to focus on the company's fundamentals and other factors unless your goal is to profit from listing gains. Investing decisions based on GMP metrics may prove right for some IPOs, and the scenario may differ for other IPOs. Just use GMP as one of the tools to validate and to know the market's pulse. Investments in IPOs solely based on GMP metric is risky.

Gurugram-based Global Health Ltd operates and manages super-speciality hospitals under the Medanta - The Medicity brand. In 2009, Global Health Ltd was founded and managed by a renowned cardiovascular and cardiothoracic surgeon Naresh Trehan. Medanta hospital has since expanded its network of hospitals to other States; Uttar Pradesh, Bihar and Madya Pradesh. Currently, the Medanta chain of hospitals has a presence in Gurgaon, Indore, Lucknow, Ranchi and Patna.

Furthermore, one hospital is under construction in Noida, which will commence operations in 2025. The Medanta chain of hospitals is owned and managed by Global Health Limited. Singapore-based Temasek Holdings and US-based private equity firm Carlyle Group are the major stakeholders in Global Health Limited. The remaining 35 percent of the ownership remains with Naresh Trehan and Sachdeva, the promoters of the hospital chain. Post this IPO, the promoter's stake will decrease to 33 percent, and public holding will increase by two per cent.

Global Health Ltd posted a net profit of Rs 196 crore and booked a total income of Rs 2,200 crore for the year 2021-22. Its growth surged by seven times in the net profit from the previous year and 48 per cent in revenue growth compared with 2020-21. Based on FY22 earnings per share, Global Health Ltd IPO is valued at a P/E of 46x. Enterprise value-to-sales is multiple of 4x.

In 2011, Global Health Ltd formed The Medanta Institute of Education and Research (MIER) to promote, support and develop indigenous clinical research and processes in traditional, modern, and integrative medicine for the benefit of humanity. In 2017, Global Health gave birth to "The Medanta Institutional Tissue Repository" in order to promote biomarker and issue-based research.

Global Health Limited is set to raise Rs 2,206 crore in the initial public offering, and the IPO is closing on 7 November 2022. The IPO opened on 3 November 2022 and has raised 662 crore from anchor investors, including Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Kotak Mutual Fund, LIC, Max Life Insurance Company, Nomura, SBI Life Insurance Company, SBI Mutual Fund and Singapore Government. Global Health has reserved 50 per cent of the shares for QIBs (Qualified Institutional Buyers) and 15 percent for NIIs (Non-Institutional Investors). The remaining 35 percent of shares have been allocated to RIIs (Retail Individual Investors). Global Health Ltd's share price band is Rs 319 and Rs 336 per equity share. The face value of equity shares is Rs 2 each. The lot size is 44 equity shares, and the cut-off price per lot is Rs 14,784. Retail investors can bid for a minimum of 44 equity shares in multiples and a maximum of 572 (13 lots), amounting to Rs 1,92,192. Global Health has maintained consistency in growth and managed to deliver lucrative financial performance. Medanta chain of hospitals has incessantly installed or modernized their medical equipment and infrastructure, and standards. Global Health earned brand value as the leading tertiary and quaternary care provider in India.

Global Health's presence in major cities and expansion plans to pan India market focus towards clinical research and pharmacovigilance, clinical research, over 30 medical specialities with 1,400 expert doctors, 2,500 beds and sophisticated infrastructure; cost-effective business model with financial performance with consistency made the IPO lucrative to investors. Consider applying for a long-term horizon.

Global Health Ltd IPO issue size is Rs 2,206 crore. The price band for the IPO is Rs 319 to Rs 336. KFin Technologies Ltd, the registrar to Global Health's IPO, will complete the allotment of shares by 11 November 2022. The listing of Global Health Ltd IPO is on 16 November 2022.