KIMS IPO – most analysts are bullish on the hospital chain’s prospects

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KIMS IPO – most analysts are bullish on the hospital chain’s prospects
KIMS Hospital branch in HyderabadKrishna Institute of Medical Sciences
  • The KIMS IPO goes live today, June 16, and it will be open for subscription till June 18.
  • The total IPO size is ₹2,144 crore. The price band is fixed at ₹815-825, and each lot consists of 18 equity shares.
  • Analysts are bullish on the company, but also state that the valuation could be slightly on the expensive side.
The KIMS IPO opens tomorrow and hopes to mop up ₹2,144 crore from the bullish share markets. It is one of the five IPOs to launch this week, with several others to come in the next few weeks.

Particulars
Issue opensJune 16, 2021
Issue closesJune 18, 2021
Price band₹815-825 per share
Market lot18 shares
Minimum order value₹14,850

Here’s how much of the issue is reserved for different categories of investors:
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ParticularsShare of issue reserved
Qualified Institutional Buyers75%
Non-institutional Investors15%
Retail Investors10%

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KIMS counts the US-based equity giant General Atlantic amongst its investors. Out of the ₹2,144 crore that it aims to raise from the markets, ₹1,944 crore will be via offer for sale from the existing investors, including General Atlantic.

The remaining ₹200 crore will be raised via a fresh issue of equity shares.


Objects of the issue


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The company’s prospectus states that out of the ₹200 crore fresh issue, ₹150 crore will be used toward payment of certain borrowings, which will help reduce its cost of finance.

The remaining ₹50 crore will be used towards general corporate purposes, including bed capacity enhancement.

Here’s what analysts are saying


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Analysts at Angel Broking recommend subscribing to the KIMS IPO, stating that the company’s expansion plans can be funded through its cash reserves.

“The company has one of the best return on equity and return on capital employed ratios of 23.8% and 24.8% respectively. It has a very healthy balance sheet with negative Net Debt/Equity. We believe that the upcoming expansion plan in Bangalore and Chennai can be funded through internal accruals and minimum amount of debt,” Angel Broking said.

Analysts at Ventura Securities are bullish about the growth prospects of KIMS, highlighting the presence of the company in Tier I, II and III markets across south India, affordable healthcare, comprehensive infrastructure, and strong brand equity.
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Stating that they believe there is a potential upside of 55% from the issue price of ₹825, Venture Securities give a thumbs up to KIMS IPO. “We value the stock at ₹1,275. This represents a potential upside of 55% from the IPO price of ₹825 per share (upper band) over the next 24 months,” the research firm said.

On the other hand, while the analysts at Choice Broking recommend subscribing to KIMS IPO, they state that the valuation is expensive when compared to the industry average.

“We view sustaining margin at these levels (way above industry trend) would remain a challenging task. Further, business is skewed towards a particular region, that is, Andhra Pradesh and Telangana, which may restrict KIMS to leverage growth opportunities,” the brokerage said.
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Brokerage/analystRecommendation
Angel BrokingSubscribe
Ventura SecuritiesSubscribe
Choice BrokingSubscribe with caution
Dilip DavdaSubscribe for long term

Understanding the business of KIMS



KIMS, also known as Krishna Institute of Medical Sciences, is a Hyderabad-based chain of multi-specialty hospitals offering a broad spectrum of healthcare facilities.

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With over two decades of history, KIMS is one of the largest private hospital chains in Andhra Pradesh and Telangana. It currently operates nine multi-specialty hospitals under the KIMS Hospitals brand.

In total, KIMS has a bed capacity of 3,064, out of which 2,500 were operational as of December 31, 2020.

KIMS IPO – most analysts are bullish on the hospital chain’s prospects
KIMS revenues and profits over the last four yearsKIMS / Business Insider India / Flourish

According to an Axis Capital report, the 3-year compounded annual growth rate (CAGR) of KIMS is the best amongst major hospital players.
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CompanyCAGR (2017-2020)
KIMS26%
Narayana Hrudayalaya19%
Apollo Hospitals16%
Manipal Hospitals16%
Healthcare Global16%
Source: Axis Capital

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