Entero Healthcare Solutions Limited IPO : coming up with its IPO issue of Rs. 1600 Cr which will open on 9th February 2024. The issue will close on 13th February and be listed on the exchange on 16th February 2024. In this article, we will look at the Entero Healthcare Solutions Limited IPO Review 2024 and analyze its strengths and weaknesses. Keep reading to find out!

Entero Healthcare Solutions Limited IPO

About the Company

Entero Healthcare Solutions Limited IPO Review

Entero is among the top three largest healthcare product distributors in India by revenue. The Company was founded by Prabhat Agrawal in 2018 who wanted to create a pan-Indian technological platform for integrated healthcare products. 

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As of FY23, the businesses owned 73 warehouses across the country that would distribute to pharmacies, clinics & hospitals in their network. The Company caters to over 81,400 retail customers and over 3400 hospitals during the year. It has over 1900 healthcare product manufacturers supplying over 64,500 stock-keeping units.

The Company is the solution for India’s fragmented distribution system, where pharmacy chains generally operate only regionally, unlike developed markets. Having a national distribution network reduces the work for manufacturers to deal with just a handful of Companies such as Entero.

Further, the Company has leveraged technology to create a direct B2B Application of Entero Direct. Through this application, customers can have real-time visibility of product range, inventory levels, order status, promotional offers, and outstanding balances.

Since the last 5 years, the Company has been quite aggressive in terms of acquiring market share by scaling its business inorganically. Entero has so far acquired over 32 healthcare product distributors. 

About the Industry

According to the UN, the global median age rose to ~30 years in 2020, up from ~20 years in 1970. India’s median comes at the lowest at just 30.9 years of age, as compared to 37.5 years of the US and 39.5 Years of the UK.

Global healthcare spending has been rising in sync with economic growth. An increase in sedentary work and heightened risk of chronic diseases is also raising healthcare spending among individuals.

However, India’s public spending on healthcare services is much lower than that of its global peers. In 2020, India’s expenditure on healthcare was 3% of GDP. It trails behind developing countries like Brazil, Nepal, Singapore, Sri Lanka, Malaysia, and Thailand. 

India’s per capita healthcare expenditure (at an international dollar rate, adjusted for purchasing power parity) was only $57 in 2020, Vs $11,702 for the US, $5,619 for Canada, $3031 for Korea, $4,927 for the UK and $3,537 for Singapore.

In terms of government expenditure as a percentage of GDP, India spends approximately 2.2% on healthcare. This includes expenditure on healthcare by central and state governments. 

The Indian healthcare industry, consisting of the pharmaceuticals, hospitals, medical devices, diagnostics, and health insurance segments, grew exponentially, logging a 10-11% CAGR, between FY17 and FY23. Last year, the industry was valued at Rs. 9.9 Lakh Cr. 

With an aging population, an increased incidence of lifestyle diseases, greater healthcare awareness, technology adoption, and a growing affluent middle class serving as some of the key drivers, the market is expected to clock an 11-12% CAGR between FY23 and FY28, reaching ₹16.5 – 17.5 Lakh Cr in FY28.

Entero Healthcare Solutions – Financials

The Company reported a revenue of Rs. 3300 Cr in FY23, which increased by 31% from Rs. 2522 Cr in FY22. Revenue has been consistently growth at 36% CAGR since FY21.

Eterno continues to remain a loss-maker; however, its losses have come down significantly from a loss of Rs. 29 Cr in FY22 to a loss of just Rs. 11 Cr in FY23.

The reason behind the reduction in Net Losses has been the reduction in purchase expenses.

In FY21, Purchase costs were 95% of the gross revenue of the Company, which has consistently dropped down to 92% of revenue in FY23. A consistent reduction in these costs should result in the Company becoming profitable.

Key Players 

Entero currently has just one listed competitor which is MedPlus Health Services. MedPlus, it is a profitable Company with an earnings per share of Rs. 4.17. The Company has a return on Net Worth of just 3.36%. However, Entero has yet to turn a profit and hence also has a negative return on Equity.

(Source: RHP of the company)

Strengths of the Company 

  1. Market Opportunity: The Indian healthcare market is highly fragmented making it tedious for pharmaceutical manufacturers to deal with multiple distributors. The manufacturers will surely benefit from market consolidation from the growth of Entero.
  2. Rapid Expansion: The Company has been expanding its presence rapidly, whether it is via acquisitions or organically. It already has a strong presence in Pan-India supplied from its 73 warehouses.
  3. Leveraging Tech: The Company has built its proprietary technology platform that allows ease of business for its B2B customers. The platform has all the integrated business tools to cater to its customers & help in order management.
  4. Large Presence: Entero is India’s largest & fastest growth healthcare product distributor. Ever since its launch in 2018, the Company has established itself as a formidable name in the healthcare distributor space.
  5. Experienced Management: The promoters of the Company Prabhat Agrawal and Prem Sethi are qualified professionals with deep knowledge of the Healthcare product segment.

Weaknesses of Company

  1. Loss Maker: The Company has consistently reported losses in the past three years, due to a write-off of its scaled-down ancillary business and due to the need to maintain huge inventory.
  2. Huge Working Capital Environment: The Company operates in a business that requires huge working capital investments, which has led to the Company taking on debt to maintain liquidity.
  3. Risk arising from Inorganic Growth: The Company recently has been on an acquisition spree. The result of these acquisitions as well as the synergies built from it remains uncertain & hence a risk.
  4. Risk of aggressive expansion: Entero has been expanding its presence across India, building warehousing capacities & supply chain network. The operational efficiency of these new capacities remains uncertain.
  5. Pledged Equity Shares of subsidiaries: Entero has pledged 100% shares in a couple of its Companies. Pledging of shares can lead to the Company losing rights to its subsidiaries in case it fails to pay back its loans.

Entero Healthcare Solutions – GMP

As of the date of writing this article, the Grey Market Premium for the shares was Entero was not yet published. We will be updating the article with the respective expected as soon as its GMP get updated.

Key IPO Information

ParticularsDetails
IPO SizeRs. 1600 Cr
Fresh IssueRs. 1000 Cr
Offer for Sale (OFS) Rs. 600 Cr
Opening dateFebruary 9, 2024
Closing dateFebruary 13, 2024
Face ValueRs. 10
Price BandRs. 1195 - 1258
Lot Size11 Shares
Minimum Lot Size1 Lot (11 Shares)
Maximum Lot Size14 Lots (154 Shares)
Min. InvestmentRs. 13,838
Listing DateFebruary 16, 2024

Promoters: Prabhat Agrawal, Prem Sethi, and Orbimed Asia III Mauritius Ltd

Book Running Lead Manager: ICICI Securities Ltd, DAM Capital Advisors Ltd, Jefferies India Pvt Ltd., JM Financial Ltd and SBI Capital Markets Ltd

Registrar to the Offer: Link Intime India Pvt Ltd

The Objective of the Issue

  1. Repayment/prepayment, of certain borrowings of by the Company.
  2. Funding of long-term working capital requirements of the Company and its Subsidiaries during Fiscals 2025 and 2026.
  3. Pursuing inorganic growth initiatives through acquisitions.
  4. General corporate purposes.

Conclusion

Entero Healthcare Solutions is well-positioned to benefit from India’s current state of a fragmented pharma distributors market. Keeping this in mind, the Company has been quite aggressive in its growth, both organically and inorganically.

The Company’s Pan-India presence, its strong technology platform, and experienced management are by far its greatest strengths. However, huge expenses & working capital requirements along with aggressive expansions do raise the risks for investing in the Company.

Nevertheless, the Company is however reducing its Net losses and the net proceeds from the respective IPO will be used to fund its working capital requirement as well as long-term debt. So, do you think Entero will become profitable by next year? Also, will you be applying for this IPO? Let us know in the comments below.

Written by Nasir Hussain

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