A patient walks through the general ward of a hospital in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Shalby Hospitals IPO: Here’s All You Need To Know

Ahmedabad-based Shalby Hospitals will launch its initial public offering today. On offer are 10 lakh shares being sold by promoter Dr Vikram Shah and up to 1.95 crore fresh shares worth Rs 480 crore to raise funds for the business.

  • Issue period: Dec. 5 – 7
  • Price band: Rs 245 - 248 (implies market capitalisation of Rs 2,680 crore at the upper band)
Shalby Hospitals IPO: Here’s All You Need To Know

Eight Things You Need To Know About Shalby

1. Shalby has 11 multi-specialty hospitals with a total 2012 beds and an operational bed count of 841 beds, according to brokerage reports quoting the draft red herring prospectus. The company also provides outpatient services through 47 outpatient clinics and has 10 shared surgery centres within third party hospitals called Shalby Arthroplasty Centre of Excellence. Six outpatient clinics and 1 SACE are in Africa, and two SACE in UAE.

2. It is the market leader in the procedure of joint replacement surgeries with a 15 percent market share of all such surgeries conducted by private corporate hospitals in India in 2016, according to the F&S Report.

Shalby Hospitals IPO: Here’s All You Need To Know

3. But the recent National Pharmaceuticals Pricing Authority order fixing a ceiling on the price that can be charged on orthopaedic knee implants could impact Shalby’s earnings negatively, said a report by Axis Capital.

4. It operates via a combination of several models ranging from the own and operate model to an asset light one that involved management of hospitals on a revenue sharing basis. Future plans include expanding presence in western and central India.

Shalby Hospitals IPO: Here’s All You Need To Know

5. Shalby’s revenue increased from Rs 259 crore in FY14 to Rs 325 crore in FY17. Revenue in the first quarter of FY18 was Rs 89 crore. The profit margin increased from 24 percent levels in FY15 to 28.9 percent in Q1 FY18. Profit almost doubled between FY14 and FY17.

Shalby Hospitals IPO: Here’s All You Need To Know

6. But the shares are aggressively priced, valuing the company at an EV/EBITDA of 28x on FY18 earnings. That puts it much above peers such as Apollo Hospitals (23x), Fortis Healthcare (20x), Narayana Health (27x) and HCG (23x).

Shalby Hospitals IPO: Here’s All You Need To Know

7. The funds raised in the IPO will be used for debt repayment (Rs 300 crore) and expansion of existing hospitals.

Shalby Hospitals IPO: Here’s All You Need To Know

8. The company raised more than Rs 150 crore from 11 anchor investors including Goldman Sachs, Citigroup, Reliance Nippon Life Insurance Company, Nomura and SBI Life Insurance Company.

Shalby Hospitals IPO: Here’s All You Need To Know

Watch the full interview with the Shalby Hospitals management.