GPT Healthcare is coming up with its IPO issue of Rs. 525.14 Cr which will open on 22nd February 2024. The issue will close on 26th February and be listed on the exchange on 29th February 2024. In this article, we will look at the GPT Healthcare Limited IPO Review 2024 and analyze its strengths and weaknesses. Keep reading to find out!
Table of Contents
GPT Healthcare Limited
About the Company
GPT Healthcare is a regional healthcare operator from Eastern India. The Company operates a chain of mid-sized full-service hospitals under the ILS Brand and provides integrated healthcare services.
As of September 2023, the Company operates 4 hospitals in Eastern India, out of which 3 are located in West Bengal and another in Tripura. Collectively these 4 hospitals constitute 561 beds offering healthcare services across 35 specialties.
The Company was founded and is managed by promoter Dr. Om Tantia. He has more than 40 years of experience as a medical practitioner and established ILS Hospitals in 2000.
The Company strategically focuses on having its presence in the relatively under-penetrated healthcare market of Eastern India. The hospitals of West Bengal are located in the densely populated areas of Kolkata and Howrah enabling the hospital to maintain high occupancy rates across the year.
In terms of specialization, GPT has a well-diversified portfolio across Internal Medicine, Diabetology, Laparoscopic, general surgery, renal transplants, orthopedics, and joint replacements.
About the Industry
According to the Global Health Expenditure Database compiled by the WHO, in CY2021, India’s expenditure on healthcare was 3.3% of GDP. As of CY2021, India’s healthcare spending as a percentage of GDP has trailed behind developing countries such as Brazil, Vietnam, Sri Lanka, and Malaysia.
India’s public spending on healthcare services remains much lower than its global peers. For example, India’s per-capita total expenditure on healthcare (at an international dollar rate, adjusted for purchasing power parity) was only $74.0 in CY2021 as compared to the United States of America’s $12,012. Health personal expenditure increased from Rs. 1.81Lakh Cr to Rs. 4.1Lakh Cr from FY21-22 supported by a rise in government schemes, health spending by the state, rise in income levels and rise in disease incidence.
On a regional level, South India has 17.3 doctors per 10,000 individuals, which is the highest number on a regional scale. West India, North India, and North East India have about 11.5, 5.3 & 6.9 doctors per 10,000 individuals. East India where GPT has its presence has only 5 doctors, 12.7 nurses, and 7 beds per every 10,000 individuals. Such is the state of eastern India where population-dense areas have shallow access to proper healthcare, which is an opportunity for GPT Healthcare.
GPT Healthcare – Financials
GPT Healthcare’s revenue from operations increased by just 7%, from Rs. 337 Cr in FY22 to Rs. 361 Cr in FY23. Since FY21, revenues have scaled from Rs. 243 Cr to grow by 22% CAGR. The half-yearly performance of GPT has been quite strong as revenue grew by 19%, from Rs. 172 Cr in H2FY23 to Rs. 204 Cr in H2FY24.
Along with slow revenue growth Net Profits of GPT Healthcare dropped by 6.4%, from Rs. 42 Cr in FY22 to Rs. 39 Cr in FY23. The drop in Net Profits came as a result of increasing Employee benefit expenses, which increased by Rs. 17%, and other expenses which increased by 22%. Doctors’ payout, which is 65% of other expenses increased by 28% over the same period leading to a drop in Net Profits. On a half-yearly basis, net profits have shown a growth of 38% from Rs. 17 Cr in H2FY23 to Rs. 23.5 Cr in H2FY24.
GPT Healthcare- Key Players
If we take a look at how GPT compares against its listed peers, we see that GPT is the smallest healthcare institution by revenue. Due to its low debt capital structure, GPT has a strong return on equity of 23.77% which is higher than the median ROE of 18% of its listed peers.
In terms of Price to Earnings ratio, GPT at the higher end of its price band of Rs. 186 and basic EPS of FY23 4.88 will be valued at 38.11x its earnings per share. This PE does seem high for any other listed company but is still lower than the industry median of 49x, calculated from the below-listed peers.
Strengths of the Company
- Key regional Presence: The Company has established a strategic presence across the densely populated yet under-penetrated market of Eastern India.
- Asset Light Model: GPT operates its hospitals on an asset-light model whereby it enters into long-term lease agreements with landlords to set up its hospital. This allows for capex to be used for further expansions.
- Diversified Specialty Mix: As GPT operates multispecialty hospitals, it caters to a variety of specialties with each of them not contributing to more than 20% of revenue.
- Increasing ARPOB: The Average revenue generated per operating bed has been on the rise from Rs. 24,681 in FY21 to Rs. 32,979 as of September 2023.
- Professional Management: The Company is run by a founder & promoter who has 4 decades of experience in the healthcare industry. He also has a deep understanding of the healthcare market in Eastern India.
Weaknesses of Company
- Revenue Concentration: Three out of four hospitals operated by the Company are in the state of West Bengal. These hospitals generate 70% of their revenue, leading to a revenue concentration risk. Also, all the hospitals are located in Eastern India.
- Reliance on multispecialty Treatments: The Company generates nearly 90% of its revenues from specialized treatments like diabetology, nephrology, laparoscopic, etc. A reduction in demand for such specialized treatment can significantly impact revenues.
- Lower Bed Occupancy: Compared to competitors Global Health, KIMS, and Jupiter Life Line Hospitals which had a bed occupancy rate of 60%, 73%, and 62% respectively. GPT Healthcare’s bed occupancy rate remains slightly lower at 60%.
- Concerns of Bad Debts: The Company suffers from its Trade Receivables turning to bad debt as 8.52% of its trade receivables as of September 2023 were Bad Debts. The percentage has jumped significantly from just 5.64% in FY21.
GPT Healthcare – GMP
As of the date of writing this article, the Grey Market Premium for the shares was GPT Healthcare has not yet been published. We will be updating the article with the respective expected as soon as its GMP gets updated.
Key Information
| Particulars | Details |
|---|---|
| IPO Size | Rs. 525.14 Cr |
| Fresh Issue | Rs. 40 Cr |
| Offer for Sale (OFS) | Rs. 485.14 Cr |
| Opening date | 22 February 2024 |
| Closing date | 26 February 2024 |
| Face Value | Rs. 10 |
| Price Band | Rs. 177 - 186 |
| Lot Size | 80 Shares |
| Minimum Lot Size | 1 Lot (80 Shares) |
| Maximum Lot Size | 13 Lots (1040 Shares) |
| Min. Investment | Rs. 14,880 |
| Listing Date | 29 February 2024 |
Promoters: GPT Sons Pvt Ltd, Dwarka Prasad Tantia, Dr. Om Tantia and Shree Gopal Tantia
Book Running Lead Manager: JM Financial Ltd
Registrar to the Offer: Link Intime India Pvt Ltd
The Objective of the Issue
- Rs. 30 Cr from the proceeds of the issue will be used towards repayment of borrowings & other outstandings of the Company.
- The remaining proceeds will be used for general corporate purposes.
Conclusion
GPT Healthcare is a regional healthcare player focused on the underserved market of Eastern India. The company operates an asset-light model and its hospitals cater to a treat a variety of specialized issues.
It is still a very small hospital chain with further room for growth. It could benefit from taking on more debt and expanding into finding better opportunities in Eastern India. In terms of its financials, the revenue growth figures of the recent year & drop in profitability should concern investors.
Although the first half of FY24 showcased much stronger growth, investors must keep track that GPT is able to quickly scale its size to remain competitive amongst its peers. So to conclude, GPT Healthcare is an asset-light hospital business with an ROE & ROCE of 24% and 26% respectively trading at a Price to Earnings of 38x. Do you think the IPO is worth applying for? What are your thoughts? Let us know in the comments below.
Written by Nasir Hussain
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