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RAINBOW CHILDREN'S MEDICARE LIMITED
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IPO Details:

 

IPO Opening Date

Apr 27, 2022

IPO Closing Date

Apr 29, 2022

Issue Type

Book Built Issue IPO

Face Value

₹10 per equity share

IPO Price

₹516 to ₹542 per equity share

Market Lot

27 Shares

Min & Max Order Quantity

27 & 351 Shares

Min & Max application amount

₹ 14,634 & ₹ 190,242

Listing At

BSE, NSE

Issue Size

29,438,884 Eq Shares of ₹10 (aggregating up to ₹1,595.59 Cr)

Fresh Issue

[.] Eq Shares of ₹10 (aggregating up to ₹280.00 Cr)

Offer For Sale

24,000,900 Eq Shares of ₹10 (aggregating up to ₹[.] Cr)

Basis of Allotment Date

May 5, 2022

Initiation of Refunds

May 6, 2022

Credit of Shares to Demat Account

May 9, 2022

IPO Listing Date

May 10, 2022

Promoters

DR. RAMESH KANCHARLA, DR. DINESH KUMAR CHIRLA AND DR. ADARSH KANCHARLA

Retail portion

QIB

NII(HNI)

 35%

 50%

 15%

Registrar

Kfin Technologies Private Limited

 

 

 

Company Profile

   

 

Rainbow Children's Medicare Limited operates a multi-speciality pediatric ,obstetrics and gynaecology hospital chain in India. It’s offers a wide range of services such as new-born and pediatric intensive care, pediatric quaternary care, obstetrics and gynaecology, and multidisciplinary fatal care, perinatal genetic and fertility care. Rainbow Children's Medicare Limited operates on a full-time doctor model ensuring that most of the core specialists are available 24/7 which is particularly important for children's emergency, neonatal and pediatric intensive care services.

 

Objects of the Issue

 

The Offer comprises of the Fresh Issue and an Offer for Sale by the Selling Shareholders

 

 

 Offer for Sale

Each of the Selling Shareholders will be entitled to its proceeds of the Offer for Sale, after deducting its portion of the Offer related expenses and relevant taxes thereon. RCML will not receive any proceeds from the Offer for Sale, and the proceeds received from the Offer for Sale will not form part of the Net Proceeds.

 

Fresh Issue

RCML propose to utilise the Net Proceeds towards funding the following objects:

  • Early redemption of NCDs issued by RCML to CDC Emerging Markets Limited (“CDCEML”), one of its Group Companies, in full; 
  • Capital expenditure towards setting up of new hospitals and purchase of medical equipment for such new hospitals;
  • General corporate purposes.

In addition, RCML expects to achieve the benefits of listing of the Equity Shares on the Stock Exchanges which, will result in the enhancement of brand name and creation of a public market for its Equity Shares in India

 

 

 

Utilisation of Net Proceeds

 

The Net Proceeds are proposed to be utilised in the following manner:

Particulars

Particulars Amount (Rs.in million)

Early redemption of NCDs issued by RCML to CDC Emerging Markets Limited (“CDCEML”), one of its Group Companies, in full;

400

Capital expenditure towards setting up of new hospitals and purchase of medical equipment for such new hospitals;

1700

General corporate purposes

*

Total

*

  

Financial Details

 

Particulars

9MFY22

FY21

FY20

FY19

Revenue from operations

761.31

650.05

719.39

542.79

Other Income

12.75

10.26

10.35

8.35

Total Income

774.06

660.31

729.74

551.14

Total Expenditure

602.47

604.61

522.36

394.28

Medical Consumables and pharmacy items consumed

160.97

103.26

105.31

80.21

Employee Benefits Expenses

84.36

102.09

108.97

85.74

Other Expenses

259.24

281.86

308.08

228.33

PBIDT

269.49

173.1

207.37

156.87

Interest

36.93

44.06

44.61

39.02

PBDT

232.57

129

162.77

117.84

Depreciation and amortization

60.98

73.34

69.41

60.32

PBT

171.59

55.7

93.36

57.53

Tax(incl DT & FBT

45.17

16.13

38.02

12.94

Current tax

52.05

23.91

43.43

17.99

Deffered tax

-6.88

-7.78

-5.41

-5.06

PAT

126.41

39.57

55.34

44.59

EPS (Rs)

13.4

4.4

6

4.8

Face Value

10

10

10

10

OPM (%)

33.7

25

27.4

27.4

PATM (%)

16.6

6.1

7.7

8.2

 

Peer Comparison

 

Particulars

Apollo

Fortis

Narayana

Max Healthcare

KIMS

Rainbow Medicare

Face / share

5

10

10

10

10

10

Total Income for FY21 (Cr)

10605

4076.69

2610.52

2619.41

1340.1

660.3

EPS (FY21 )

10.74

-1.45

-0.7

-1.59

26.87

4.36

NAV per share

320.1

81.06

54.82

58.37

111.32

48.82

Return on net worth

3.30%

-0.75%

-1.46%

-2.47%

23.74%

6.70%

P/E (As on 24 April 2022)

270.27

-137.34

-580

-129.4

54.19

NA

P/B (As on 24 April 2022)

9.07

2.45

7.41

3.53

NA

NA

Market Price (As on 25 April 2022

4673.95

270.5

695.95

413

1350

NA

Business Strategy:

 

  • Strengthen tertiary and quaternary paediatric services in existing hospitals
  • Further grow comprehensive perinatal services offered under “Birthright by Rainbow”
  • Grow presence through hub and spoke networks across key geographic clusters and new locations
  • Initiatives to drive performance efficiencies
  • Digital healthcare initiatives to address patient convenience, operational efficiencies and expand reach

 

Factors Leading to Rise in Demand for Pediatric Healthcare Services and Neo-natal Care units

          

  • Increasing health awareness to boost hospitalization rate
  • Rising income to make quality paediatric healthcare more affordable
  • Growing health insurance penetration to propel demand for the healthcare market, including pediatrics and neonatal care
  • Rise in maternity age
  • Rise in pregnancy complication

 

Assessment of India’s Hospital Market  

      • The Indian Healthcare delivery market is estimated to grow to Rs.5 trillion in the financial year 2022
      • Healthcare delivery industry to grow 15-17% over next four years
      • Government policies to improve healthcare coverage
      • Rising income levels to make quality healthcare services more affordable
      • Increasing health awareness to boost hospitalization rate
      • Innovative business models to help penetration in tier II and III cities

Key Concerns 

 

  • Dependent on medical professionals as RCML’s business and financial results could be impacted if it is not able to attract and retain such medical professionals.

 

  • RCML engages doctors primarily on a consultancy service contract basis and there is no assurance that these doctors will not prematurely terminate their agreements.

 

  • Revenues are highly dependent on hospitals in Hyderabad and Bengaluru. It is also significantly dependent on certain specialties for a majority of its revenues.

 

  • The COVID-19 pandemic has affected RCML’s regular business operations and may continue to do so, depending on the severity and duration of the COVID-19 pandemic.

 

  • RCML has not entered into any definitive agreements for the new hospitals which it proposes to set up and where it propose to incur capital expenditure by utilizing its Net Proceeds.

 

  • RCML operates in a regulated industry, and compliance with applicable safety, health, environmental, labor and other regulations, or failure to obtain or renew approvals, licenses, registrations and permits, may adversely affect the business, results of operations and cash flows.

 

  • Business depends on the strength of brand and reputation. Failure to maintain and enhance brand and reputation, and any negative publicity and allegations in the media against RCML.

 

  • RCML face intense competition from other healthcare service providers. If it is unable to compete effectively, its business, results of operations and cash flows may be materially and adversely affected.

 

  • RCML’s hub-and-spoke model of provision of healthcare services may not be successful and that could adversely impact the business, financial condition and results of operations as a whole.

 

Summary

     

      Rainbow Children Medicare Limited has a presence in the maternity and paediatric healthcare market in India and there is a growing preference for speciality maternity hospitals. RCML is leading multi-specialty hospital chain in India operating in six cities with total bed capacity of 1500 beds following hub-and-spoke model mainly private maternity healthcare market grew at 4-5% CAGR between FY216-FY20 from Rs173 billion to Rs 208 billion. The private maternity care market is expected to grow at CAGR of 11-12% between FY21-FY26 to Rs 261 billion.
On the valuation front if we take EPS of Dec FY21 of 13.39 and upper price band of ₹542, P/E ratio comes to 40.47x. Based on FY21 financials Market cap to revenue comes around 8x , where as the industry P/E is 114.49x which indicates that the IPO is suitably price.

Hence, it is recommended to SUBSCRIBE FOR BOTH LISTING GAINS AND LONG TERM

 

 

 

DISCLAIMER

 


 

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