Metropolis Healthcare IPO Review

Metropolis Healthcare Limited

Metropolis Healthcare IPO comprises offer for sale of 13.7 million equity shares, with a face value of ₹2 per share in a price band of Rs. 877-880.
Metropolis Healthcare IPO at the upper end will fetch ₹1,204 crore.
The promoter Sushil Shah will be offering up to 6.3 million shares and investor CA Lotus Investments (Carlyle) will be offering 7.4 million equity shares for sale. Carlyle will fetch ₹652.3 crore for the shares it has put up for sale in the IPO which will value Metropolis Healthcare at about Rs. 4,400 crore

Metropolis Healthcare IPO Details

PeriodWed, April 3 – April 5, 2019
DetailsOFS 13,685,095 Equity Shares
FVRs.2/-
Issue-Rs. Cr1,204.29 Cr
PriceRs.877 – 880
Bid Lot17 Equity Shares
Issue Str.
QIB75% of the net offer
NIB15% of the net offer 
Retail10% of offer- 1,338,509 Shares- 117.79 cr.
BRLMsJM Fin, Credit Suisse, Goldman Sach, HDFC Bank, Kotak Mahindra 
RegistrarLink Intime India Pvt Ltd

About Metropolis Healthcare Ltd.

  • Metropolis Healthcare Ltd. is one of the leading diagnostics company in terms of revenue in India holding the second position, according to Frost & Sullivan.
  • During FY18, Metropolis Healthcare Ltd. has done 1.6 crore tests and total patient catered were 0.77 crore.
  • The company carries out 3,487 clinical laboratory tests and 530 profiles.
  • Metropolis Healthcare Ltd. had a presence across 19 states in India, as of December 31, 2018, with a leadership position in the west and south India.
  • The company derives 62.75 per cent of its revenues from 5 focus cities which are amongst the top 8 GDP cities in India. All these cities (Mumbai, Bengaluru, Chennai, Surat and Pune) are in the southern and western part of India
  • The company adopted torganic growth including B2B and B2C expansion and growth through acquisitions & integration.
  • New avenues of growth include laboratory on lease model and public-private partnership.
  • MHL operates a ‘hub and spoke’ model for quick and efficient delivery of services through their laboratory and service network which covered 197 cities in India, as of December 31, 2018.

Metropolis Healthcare Ltd: Financials

Rs.  In Cr.9m FY19FY18FY17FY16
Revenue 559.31643.57544.72475.47
 Growth (%)18.15%14.56%
EBITDA as stated142.47173.38163.81130.96
EBITDA (%)25.47%26.94%30.07%27.54%
Profit Before Tax134.63160.3159.92127.52
PAT88.77109.75107.2681.96
PAT Margin15.87%17.05%19.69%17.24%
Share Capital10.049.549.549.54
Reserves458405.22313.63269.18
Net Worth468.04414.77323.17278.72
NAV (Rs.)93.2783.5865.1256.16
Face Value2   
IPO Price880   
EPS (Rs.)17.1820.6120.4815.25
RoNW (%)18.30%24.66%31.46%27.55%
PE FY1842.70
P/BV9.43
CAGR Sales (fy16-18)16.34%
CAGR PAT (Fy16-18)15.72%
Market Cap Rs. Cr.4417.60
Market cap / Sales6.86

Metropolis Healthcare IPO : Pros

  • Metropolis Healthcare Ltd. is one of the leading diagnostics companies in India well positioned to leverage the expected industry growth.
  • Has a widespread operational network, young patient touch point network and asset-light growth of service network.
  • Metropolis Healthcare Ltd. has comprehensive test menu with wide range of clinical laboratory tests and profiles.
  • Metropolis Healthcare Ltd. has strong and established brand with focus on quality and customer service
  • Metropolis Healthcare Ltd. has a robust information technology structure with focus on improving efficiency
  • Metropolis Healthcare Ltd. has an established track record of successful acquisition and integration in India and overseas; and experienced senior management team and qualified team.

Metropolis Healthcare IPO : Cons

  • Changes in pricing policies and restrictions on pricing by the government or other authorities could adversely affect the profitability
  • about 10% promoters shares are pledged to an NBFC for term loan availed by a Promoter group co.
  • Competition from Unorganized Sector


See Metropolis Healthcare IPO: Comparison with Peers

Metropolis Healthcare IPO : Assessment

  • According to Frost & Sullivan, Indian diagnostics market
    is projected to grow to approximately Rs. 802 billion by FY 2020. It was valued at Rs. 596 billion in the FY 2018.
  • Metropolis Healthcare Ltd. conducts operations in foreign countries including Ghana, Nepal, Oman, Nigeria, UAE, Kenya, Mauritius, Sri Lanka and Zambia. These revenues from operations outside India account for 7-8% of its revenue.
  • Metropolis Healthcare IPO is asking for a market cap to sales (FY18) of 6.86 times, which looks expensive on an absolute basis, however looks just ok when compared to peers.
  • Company will not receive any proceeds from the Offer.
  • Metropolis Healthcare IPO seems to be commanding some attention in Grey market with some reports of Rs. 70+ GMP. But these cannot be substantiated and could be scattered.
  • I at this point of time, would be observing the response Metropolis Healthcare IPO. The company was shown good growth in recent years, has a unique asset light model but most factors seems to priced in price. Have a feeling that management will continue to pursue aggressive growth. In case of poor response from QIBS and HNIs in first 2 days, a closer look at Metropolis Healthcare IPO may be warranted.
  • 05/04/19: undercurrent in Metropolis looks week and barring some last minute rush by QIBs, Iam likely to skip Metropolis Healthcare IPO

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering and 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.

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