KIMS IPO (Krishna Institute of Medical Sciences IPO) is set to raise Rs 2,143 crore through a combination of fresh issue and an offer for sale (OFS) by existing shareholders. This .consists of a fresh issue of equity shares worth Rs 200 crore or 24.24 lakh equity shares of face value Rs 10 and an Offer for Sale of 23,560,538 Equity Shares. Krishna Institute of Medical Sciences (KIMS) is one of the leading healthcare groups in the states of Andhra Pradesh and Telangana, growing from a 200-bed hospital in the year 2000 to a chain of multi-speciality hospitals.
KIMS IPO Details:
|Issue Period||16th June – 18th June, 2021|
|Issue Details||Fresh Issue of Equity Shares upto ₹ 200 Cr + OFS of 23,560,538 Equity Shares|
|Issue Size (₹ Cr)||₹ 2,120.18 – 2,143.74 Cr|
|Bid Lot||18 Shares|
|Price Band||₹ 815 – 825|
|Issue Structure :|
|QIB||75% of the net offer|
|NIB||15% of the net offer|
|Retail||10% of the net offer ( – 2,574,235 Shares-₹ 212.37 Cr)|
|BRLMs||Axis Capital, Kotak Mahindra Capital, Credit Suisse Securities, IIFL Securities|
|Registrar||Link Intime India Pvt. Ltd.|
- ANCHOR ISSUE: IPO bound KIMS IPO raised Rs 955.68 crore from 43 anchor investors. Out of the total allocated shares to anchor investors, about 52,54,614 equity shares (i.e., 45.36 per cent shares) were allocated to 10 domestic mutual funds, amounting to Rs 433.50 crore through a total of 19 schemes and included names like HDFC Trustee, Axis Mutual Fund, ICICI Prudential, Nippon Life India, IDFC MF, UTI MF, Mirae MF, and HDFC Life Insurance Company. Other investors who participated in the anchor book were Nomura Funds, Stock Mother Fund, Segantii India Mauritius, Goldman Sachs, Zaaba Pan Asia Master Fund, Integrated Core Strategies, Moon Capital, Ghisallo Master Fund, and Societe Generale.
About KIMS (Krishna Institute of Medical Sciences)
- Krishna Institute of Medical Sciences Limited (“KIMS”) was started by renowned cardiothoracic surgeon Dr Bhaskara Rao Bollineni in 2000.
- KIMS is one of the largest corporate healthcare groups in AP and Telangana in terms of number of patients treated and treatments offered. They operate 9 multispecialty hospitals under the “KIMS Hospitals” brand, with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of March 31, 2021, which are 2.2 times more beds than the 2nd largest provider in AP and Telangana.
- KIMS offers a comprehensive range of healthcare services across over 25 specialties and super specialties, including cardiac sciences, oncology, neurosciences, gastric sciences, orthopaedics, organ transplantation, renal sciences and mother & child care.
- Their flagship hospital at Secunderabad is one of the largest private hospitals in India at a single location (excluding medical colleges), with a capacity of 1,000 beds. They have significantly expanded their hospital network in recent years through their acquisitions of hospitals in Ongole, Vizag, Anantapur and Kurnool.
- Their hospitals are equipped with high-quality medical equipment and employ practices and policies which help them provide quality healthcare services to their patients. KIMS Secunderabad was the second hospital in Hyderabad to install the 4-Arm HD da Vinci robotic surgical system, which facilitates complex surgeries that are virtually scarless.
- KIMS Vizag was one of the first hospitals in AP to have (i) an Endoscopic Ultrasound System with Radial & Linear Scopes; (ii) a 2T scope to perform high end endoscopy procedures such as ESG & therapeutic procedures; and (iii) a Power Spiral
- Endoscopy for performing end to end enteroscope through motorized scope.
- In Fiscal Year 2021, their 9 hospitals recorded Average Revenue Per Operating Bed (“ARPOB”) of ₹ 20,609, a bed occupancy rate of 78.60%, and an Average of length of stay (“ALOS”) of 5.53 days, on an aggregate basis.
- In Fiscal Year 2021, ARPOB for their hospitals situated in Tier 1 cities was ₹39,571 and ARPOB for their hospitals situated in Tier 2-3 cities was ₹11,187.
KIMS IPO: Financials
|Particulars / (₹ In Cr)||2021||2020||2019|
|Revenue from Operations||1,329.94||1,122.65||918.01|
|Revenue Growth (%)||18.46%||22.29%||–|
|Adj. EBITDA (%)||28.43%||22.24%||18.83%|
|Profit Before Tax||279.01||140.53||-15.38|
|Net Profit/Loss Margin (% )||15.45%||10.25%||-5.32%|
|Equity Share Capital||77.59||74.49||74.49|
|Reserves as stated||786.14||523.64||466.17|
|Net worth as stated||863.73||598.13||540.66|
|Equity Post IPO||80.01|
|EPS (Post IPO) FY21||25.68|
|Market Cap / Sales||5.0|
- Regional leadership driven clinical excellence and affordable healthcare
- Ability to attract, train and retain high quality doctors, consultants and medical support staff
- Track record of strong operational and financial performance
- Well positioned to consolidate in India’s large, unorganized yet rapidly growing and underserved affordable healthcare market
- Disciplined approach to acquisitions resulting in successful inorganic growth
- Experienced senior management team with strong institutional shareholder support.
- In FY2021, top 10 doctors contributed 21.8% of total income and the top 25 doctors contributed 36.1% of total income. The company is highly dependent on healthcare professionals, and business and financial results could be impacted if it is not able to attract and retain such healthcare professionals.
- KIMS Secunderabad and KIMS Kondapur contributes to around 62.98% and 64.09% of total revenues in FY2020 and FY2021.
- Regional concentration risks
KIMS IPO: Assessment
- KIMS (Krishna Institute of Medical Sciences Limited) operates nine multi-specialty with a total bed capacity of 3,064, including over 2,500 operational beds as of March 31, 2021, which is 2.2 times more beds than the 2nd largest provider in AP and Telangana.
- KIMS has gone from being a loss-making entity in 2019 to a profitable firm in the previous financial year. Between financial year 2017-18 and 2020-2021 revenues / EBITDA / PAT of KIMS have grown at a 3-year CAGR of 20.4% / 114% / 105%, .
- KIMS has a strong regional focus on Andhra and Telengana and is looking at Bangalore & Chennai. KIMS has intentionally and strategically decided to focus on the southern India healthcare market where it has a strong understanding of regional pulse, customer culture, mindset of medical professionals and there exists a good market for quality and affordable healthcare services.
- KIMS is one of only three hospitals in India that are rated AA by Crisil
- KIMS is almost debt-free and generated good amount of free cash flows in financial year 2020-21.
- despite operating in an asset-heavy industry,
- The IPO is mainly to provide exit to promoters and investors. General Atlantic is making a partial exit.
- The strong performance put up by KIMS in FY21 may appear to be be due to COVID‐19 but as per management this is not the case and higher revenues from transplant etc. has contributed to better margins. Infact due to COVID 19 volume of patients may have been slightly less as most of the Company’s hospitals were non Covid but patients may have have postponed their procedures due to perceived COVID risks. This was also as KIMS added 2 new specialties, heart & lung transplants and liver transplants. These are very high-end surgeries with fewer patients but high margins.
- KIMS’s revenue is diversified across specialties and the Income mix was 17.82% from cardiac sciences, 12.55% from neuro sciences, 9.30% from renal sciences, 4.64% from orthopaedics, 5.25% from gastric sciences, 5.71% from oncology, 6.11% from mother & child care, 1.86 from organ transplant, 35.28% from others, and 1.48% from other income. The top 10 doctors contributed 21.80% of their total income and the top 25 doctors contributed 36.10% of their total income.
- Its flagship hospital at Secunderabad, have been accredited by the NABH, achieved NABH standards for emergency care and are “green operating theatre” by Bureau VERITAS. As on January 30, 2021, KIMS Secunderabad is the only hospital in AP and Telangana to have an emergency department complying with NABH standards.
- For FY 2021, it clocked OPM of 27.9%. KIMS IPO is priced at a P/E of around 31.2 times its FY21 earnings (post-issue capital). This is reasonable compared to peers though Hospitals are judged more on other parameters.
- Its EV/Sales is 4.8 x times which is almost same as Fortis Healthcare, lower than Max Helathcare but higher than other peers like HealthCare Global Enterprises, Narayana Hrudayalaya, Shalby, Kovai Medical Center etc.
- Since inception KIMS has retained over 80% of doctors. A possible reasons is that KIMS doctors have equity ownership in the company.
- The 3 year CAGR of KIMS is the best amongst major hospital players
- KIMS IPO was last reported to be commanding a GMP of Rs. 20-30.
- In past Hospital IPO’s have not given listing gains to Investors.
- I intend to apply in KIMS IPO to a limited extent or fully depending on subscription on Day 3. Even as valuations look stretched I have a positive view on the company due to track record of strong operational and financial performance, ability to turn around acquired hospitals, addition of high end surgeries, good cash flows. Listing gains will depend more on market conditions at the time of listing.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.