What you must know about Sangani Hospitals IPO

Sangani Hospitals Ltd, is an SME IPO on the NSE which is opening for subscription on 04th August 2023. The company, Sangani Hospitals Ltd, was incorporated in 2021 but the journey had begun in 2001 itself. Sangani Hospitals is a multi-specialty hospital based in Keshod in Gujarat. Sangani Hospital was promoted by Dr Ajay Sangani and his brother Dr Rajeshkumar Sangani. It currently has two multispecialty hospitals based out of Keshod and Veraval; both in the state of Gujarat. It has specialized departments for gynaecology, obstetrics, orthopedy, joint replacement, general surgery, uro-surgery, trauma unit, dental, and laparoscopic surgery.

Sangani Hospital at Keshod, Junagadh is a 36 beds multi-speciality hospital. It has primary, secondary, and tertiary care facilities. The location of the hospital makes it easily accessible to nearly 54 adjacent small villages. Sangani Hospital has been rated as one of the topmost hospitals in the district of Junagadh. They have currently applied for NABH registration. The other hospital; Sangani Super Speciality Hospital at Veraval is a 32-bed multi-speciality hospital which has already cleared NABH (National Accreditation Board for Hospitals). It has significant focus on Tertiary care facilities and is located just 45 km away from Sangani Hospital, Keshod. Sangani Super Speciality Hospital at Veraval is well equipped with medical and surgical specialities and backed by a highly qualified and experienced team of doctors.

Key terms of Sangani Hospitals IPO SME

Here are some of the highlights of the Sangani Hospitals IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 04th August 2023 and closes for subscription on 08th August 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The issue price for the fresh issue IPO has been fixed in the price band of ₹37 to ₹40 per share.
   
• The company will issue a total of 37.92 lakh shares which at the upper end of the price band at ₹40 per share aggregates to a total fund raising of ₹15.17 crore.
   
• There is no offer for sale portion in this IPO and hence the fresh issue size of ₹15.17 crore will also be the total size of the IPO of Sangani Hospitals Ltd.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 192,000 shares. The market maker, when appointed, will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Dr Ajay Sangani and Dr Rajeshkumar Sangani. The promoter holding in the company currently stands at 100%. However, post the fresh issue of shares, the promoter equity will be diluted to 72.48%.
   
• The fresh issue funds will be used by the company for expansion related capital expenditure at the Sangani Hospital at Keshod, capex at the Sangani Multispecialty Hospital at Veraval and for general corporate purposes.
   
• While Unistone Capital Markets Private Ltd will be the lead manager to the issue, Bigshare Services Private Limited will be the registrar to the issue. The market maker for the issue is yet to be finalized by the issuer.

IPO allocation and minimum lot size for investment

The company has allocated 10% of the issue size for qualified institutional buyers, 45% for the retail investors and the balance 45% for the HNI / NII investors. The break up in terms of minimum and maximum allowed quota has been captured in the table below.

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹120,000 (3,000 x ₹40 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 6,000 shares and having a minimum lot value of ₹240,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The upper band of the book building price band has been considered for the IPO reference. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Sangani Hospitals IPO (SME)

The SME IPO of Sangani Hospitals Ltd IPO opens on Friday, August 04th, 2023 and closes on Tuesday August 08th, 2023. The Sangani Hospitals Ltd IPO bid date is from August 04th, 2023 10.00 AM to August 08th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is August 04th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Sangani Hospitals Ltd

The table below captures the key financials of Sangani Hospitals Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The company has reported net margins of 25% and ROE of 20% in the last full year. Year FY23 is likely to see a doubling of revenues although the profits may not grow in tandem.  However, in the last 3 years, the profits have nearly gone up more than 4-fold even as top line has largely remained static. Hospitals are typically a long gestation business where most of the capex happens to be front-ended. It is in the longer run that such businesses do really well in terms of long term returns.

The weighted average EPS of the company for the last 3 years is ₹4.55. So, the price of ₹40 for the IPO price discounts the EPS at a P/E of less than 10. That is very reasonable for healthcare stocks. It is a focused play, but considering the growing demand and increasing life expectancy, it can be considered by investors with higher risk appetite and longer equity holding capacity.