Yatharth Hospital & Trauma Care Services Ltd has entered the capital markets with its fresh issue of Rs490 crore and an offer for sale of 65.51 lakh shares in a price band of Rs285-300. The issue opened on Wednesday (July 26) and would close on Friday (July 28).

The company has on Tuesday completed allocation of 68.65 lakh equity shares to 15 anchor investors comprising 18 entities at Rs300 per share. 12 of these entities were allotted an equal 7.12 per cent of the anchor allotment of 4,88,800 shares each, while the remaining three were allotted 4.85 per cent of the anchor portion.

The company is a Delhi-NCR focussed multi-speciality hospital, having three hospitals in Noida, Greater Noida and Noida extension of cumulative 1,100 beds. It acquired a 305 bedded hospital in Jhansi-Orchha in the previous year. The company is in the process of ramping up the facilities at this acquisition and as utilisation improves, revenues would flow to the company and help in breaking even on a faster basis. Yatharth began its journey in 2010 with a 100-bed hospital in Greater Noida. From there it has extended its reach with three hospitals and 1,100 beds across Noida, Greater Noida and Noida Extension. It is further ramping up capacity in two of the existing hospital by building additional bed capacity

In terms of numbers, the company has 394 critical care beds out of 1,405 beds. They have 609 doctors. Their average occupancy rates are 45.3 per cent. The ARPOB (average revenue per occupied bed) is a healthy Rs26,538, while the ALOS (average length of stay) is 4.32 days. The company enjoys an EBITDA margin of 25.7 per cent and a PAT margin of 12.6 per cent. The company reported revenues of Rs520 crore for the year ended March 23. It had a healthy net margin of 12.6 per cent. The net profit was Rs66.07 crore, and the EPS was Rs10.09. The PE band for the issue based on this EPS is 28.25-29.73. OPD or out-patient department is a very strong segment of revenue for the hospital and this also acts as a future business generator for the hospital group.

The company has entered the super speciality organ transplant business. While there are issues with permissions in this segment, the focus of the company is on international business where patients with donors are referred by embassies and consulates. This ensures smooth handling of paperwork as the recipient and donor are both from the same country and certified by the foreign embassy. The credentials from this activity add to the capability of the hospital and would be a big advantage once the new international airport opens next year at Jewar. The company has begun exploring the increase in medical tourism business and the opportunity post the airport being commissioned. While individually the hospitals may be considered to be small, overall Yatharth is a hospital with significant presence in its area of operation. The infrastructure development with expressways and highways coming up across UP and adjoining states is a big attraction and opportunity for increasing the target area of patients and reach.

In terms of future, the company has acquired adjoining land at its Greater Noida Hospital, and emerged as the highest bidder at the adjoining land to its Noida extension hospital. This will provide the ability to expand both these hospitals. A part of the proceeds of the issue of Rs65 crore has been earmarked for inorganic expansion not yet finalised.

On future expansion, the company as mentioned is adding capacity at two of its existing hospitals. It is looking at the acquisition route. Thirdly it is looking to expand in the Delhi NCR region further with new capacities in the Haryana belt and also parts of UP.

Looking at the track record of the company, its financials, its location in the Delhi NCR region, gives the company the opportunity to rapidly expand and build on its multi-speciality facilities. The recent organ transplant facility would be another important avenue to expand business and utilisation of facilities. Investment in the company is warranted.

The active grey market leaves comfort for applicants who would be allotted shares. Apply for listing gains and look to hold for the medium-term to maximise returns.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)