What you must know about Unihealth Consultancy IPO

Unihealth Consultancy Ltd was incorporated in the year 2010 in Mumbai, to provide quality and affordable healthcare services. The company is based in India but has operational presence in multiple countries across the African continent, where it is largely focused on. The company has several verticals under the banner. These include the Medical Centres vertical, Hospitals vertical, Consultancy Services vertical, Pharma distribution vertical, Medical Consumables vertical, and Medical Value Travel. Under the aegis of Unihealth Consultancy Ltd, the company operates a combined capacity of 200 operational hospital beds across two multi-specialty facilities. These first facility is the UMC Victoria Hospital in Kampala, Uganda with a bed strength of 120 beds.  The second facility is the UMC Zahir Hospital in Kano, Nigeria which has a bed strength of 80 beds. Apart from these 2 hospitals, Unihealth Consultancy Ltd also operates Unihealth Medical Centre, which is a dedicated dialysis facility, in Mwanza, Tanzania.

With its strong global footprint and exposure to global best practices, Unihealth Consultancy Ltd is currently providing project management consultancy services to set up a 300 bed Health City in Undri, Pune. This is being implemented by Unihealth Consultancy on behalf of PHRC Lifespaces Organization. It also has few other healthcare consultancy projects in other African nations like Kenya and Angola. Unihealth has a dedicated subsidiary, Unihealth Pharmaceuticals Private Limited, which undertakes the business of procuring and exporting pharmaceutical and medical consumable products. This company exports all the necessary goods and consumables to its hospital and medical care centre network located in the continent of Africa. Its major client roster is spread across a slew of African nations including Uganda, Nigeria, Tanzania, Kenya, Zimbabwe, Angola, Ethiopia, Mozambique, and the Democratic Republic of Congo; apart from India.

Key terms of Unihealth Consultancy SME IPO

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

• The issue opens for subscription on 8-September-2023 and closes for subscription on 12-September-2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book building issue. The issue price band for the fresh issue IPO has been fixed in the band of ₹126 to ₹132 per share. For all analysis purposes, the upper end of the price band has been considered.
   
• Unihealth Consultancy IPO has only a fresh issue component with no book built portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Unihealth Consultancy Ltd will issue a total of 42,84,000 shares (42.84 lakhs), which at the upper end of the band price of ₹132 per share aggregates to a total fund raising of ₹56.55 crore.
   
• Since there is no offer for sale portion, the total size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will comprise of 42.84 lakh shares, which at the upper end of the price band of ₹132 per share will aggregate to ₹56.55 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 2,16,000 shares. The market maker for the issue is Rikhav Securities Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Dr. Anurag Shah and Dr. Akshay Parmar. The promoter holding (including the promoter group) in the company currently stands at 95.32%. However, post the fresh issue of shares and the IPO, the promoter equity holding share will reduce to 68.80%.
   
• The fresh issue funds will be used by the company for investing in its JV in Kampala, Uganda as well as the joint venture in Nigeria and Tanzania. Part of the funds raised will also be applied for general corporate purposes.
   
• While Unistone Capital Private Ltd will be the lead manager to the issue, Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Rikhav Securities Ltd.

Unihealth Consultancy IPO allocation and minimum lot size for investment

The company has allocated 50% of the issue size for the QIBs, 35% for the retail investors and the balance 15% for the HNI / NII investors or the non-retail investors in Unihealth Consultancy IPO. This refers to the net issue after market maker quota. 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 1,000 shares. Thus, retail investors can invest a minimum of ₹1,32,000 (1,000 x ₹132 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 2,000 shares and having a minimum lot value of ₹264,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of Unihealth Consultancy IPO (SME)

Unihealth Consultancy IPO opens on Friday, September 08th, 2023 and closes on Tuesday  12-September-2023. The Unihealth Consultancy IPO bid date is from 8-September-2023 10.00 AM to 12-September-2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 12-September-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 Unihealth Consultancy Ltd

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

Data Source: Company DRHP filed with SEBI

The company has reported net margins of over 20% in the latest year and it has bene in the vicinity of 15% on an average over the last 3 years. That is an impressive level of net margins, in an industry that can entail a high level of capex in the initial years and where the gestation for most of this spending can quite long. In addition, if one looks at the return on net worth of the company, it is in the vicinity of 20% to 30%, again a very healthy level. These levels have been sustained and the steady growth in top line is also an indication that the company can sustain the margins, although the asset sweating ratio appears to be quite low. However, as the asset sweating improves over time, the ROE would automatically get a boost and that would be value accretive for the company. Broadly, in terms of business model and the steady cash flows, the outlook appears to be positive.

How does the stock look on P/E terms? The valuation story also appears to be relatively favourable. The weighted average EPS of the last 3 years has been around ₹5.37 while the latest EPS has been around ₹7.00 per share, which is more reliable, albeit conservative for a growing business. This discounts the price of the IPO at a P/E ratio of around 18 times earnings. This is much lower than the peer group valuation assumption of around 40X to 50X P/E ratio. That makes the stock attractive in P/E terms. However, there is a catch on the risk front. The business operations are largely in African and many of these African nations are known to have very volatile governments and constantly shifting political landscape. That can have an impact on the future valuations and hence this issue is best taken up by investors who are willing to take on higher risk and with a longer term perspective.