Medi Assist Healthcare Services IPO Review: Have you ever wondered how major corporations seamlessly purchase and manage insurance for thousands of employees? Do you think that insurance companies go through the hassle of onboarding all these employees and then also settling all the claims when they come up? 

Well here is a company that makes the life of these Insurance Companies as well as Employers easier. The Company is called Medi Assist Healthcare, which is into providing third-party administration (TPA) services

Medi Assist Healthcare Services IPO Review

The Company is coming up with its IPO issue of Rs. 1,171.58 Cr which will open on 15th January 2024. The issue will close on 17 January and be listed on the exchange on 22nd January 2024.

About the Company

Medi Assist Healthcare Services provides third-party administration services such as customer service, and network management to Companies that issue insurance. The Company provides its services to over 35 insurance Companies both domestically & globally. 

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As of FY22, Medi Assist TPA had a market share of 14.83% in the retail health insurance market and 41.71% in the group health insurance market. In FY23, the Company managed Rs. 14,574.65 Cr worth of health insurance premiums, for both group & retail combined.

Medi Assist via its international subsidiaries under the name Mayfair Group provides hospitalization, call centre, billing & claim processing services in the UK, Australia, Singapore, and many other countries. 

The Company has developed a healthcare provider network of 18,754 hospitals, across 1069 cities and 31 towns. It also covers over 141 countries globally.

Medi Assist has serviced over 9500 group accounts across sectors administering insurance requirements of Companies. As of FY23, the Company has managed over Rs. 12,818 Cr worth of group health insurance premiums, roughly 28% of India’s entire group health insurance market. 

In terms of individual policyholders, the Company has managed to administer over Rs. 1757 Cr worth of policies, or 5.06% of India’s retail health insurance market.   

About The Industry

The industry analysis is done as per the report published by Frost & Sullivan (India), who performed an Independent Market Assessment on the Third Party Administrators in Indian Health Insurance Industry.

As per the report, India’s out-of-pocket expenditure (OOP) is at a rate of 50.59% in FY21. The OOP is higher compared to Asian counterparts who are in the range of 30%-35% and even this figure is substantially higher than the WHO’s figure of 15%-20%.

The high OOP creates a significant burden on Indian households. This condition is worsened by the severe medical inflation faced by India in the range of 8.65% in 2021 and 13.6% in 2022.

Although this scenario is detrimental to the country’s economy, it however becomes an opportunity for the Company which serves the underlying insurance industry. The increasing OOP expenditure is encouraging demand for voluntary health coverage among individuals. 

Health is the fastest-growing insurance segment in India, growing at a CAGR of 18.45% from FY17 to FY22. The segment contributes to over 36.48% of the gross premiums collected in the country. COVID was the biggest catalyst for the health insurance industry causing a 31% jump in insurance penetration in the country. After COVID, authorities have become more strict with companies, demanding health and safety training for employees, with a CPR certificate as a must-to-do milestone.

Medi Assist Healthcare Services IPO – Financials

Medi Assist reported a revenue of Rs. 519 Cr in FY23, which increased by 26% from Rs. 412 Cr in FY22. Revenue has scaled by 22.55% CAGR since FY21.

Net Profit during the year grew at a slower 15.3%, from Rs. 64 Cr in FY22 to Rs. 74 Cr in FY23. However, in the past three years, Net Profit has increased by 68% CAGR since FY21.

Medi Assist on a standalone basis has an EBITDA Margin of 23% and its subsidiaries Raksha & Medvantage have an EBITDA Margin of 6.43% and -54.73%. In terms of ROE Medi Assist has an ROE of 19.63% Raksha has an ROE of 7.02%, and Medvantage is yet to turn a profit.

The Company’s Basic Earnings Per share as of FY23 was at 10.76x. At the higher end of the price band of Rs. 311, the Company price-to-earnings valuation would be at 38.84x.

In H1FY24, the Company turned Net Operating Cash flow negative with a negative cash flow of Rs. 18.91 Cr. This was due to trade receivables increasing by Rs. 84 Cr. 

Medi Assist Healthcare Services IPO Review – Key Players 

Medi Assist is the first listed Third Party Insurance Administrator (TPA) Company in India. Due to this, we will not be able to compare the Company with listed peers. However, let us take a look at how the Company fares against its unlisted peers.

Medi Assist is by far the largest Company in the TPA space by revenue. In terms of EBITDA as well as PAT margins, the Company also maintains its lead with industry-leading margins. 

ROE & ROCE of the Company also stand at a reputable 19.63% and 21.67% respectively. These ratios show that the Company has fundamentally strong earnings and has maintained low debt.

Medi Assist Healthcare Services IPO Review - Key Players Data
Source: RHP of the Company

Strengths of the Company

  1. The Company, along with its subsidiaries has a 30.03% market share in group insurance and 6.98% in retail insurance policies.
  2. Medi Assist’s technological platform is integrated with insurance companies allowing faster claim settlement as well as reduction in costs.
  3. The Company has a pan-India network of 18,754 hospitals across 1069 cities and 31 states.
  4. Medi Assist has been successful in acquiring business & integrating under its group and building synergies across these subsidiaries. It will continue to acquire more such Companies in the future.

Weaknesses of the Company

  1. The Company has a significant revenue concentration risk with the Top 5 of its clients contributing to 81.54% of its FY23 revenue.
  2. The Business is significantly dependent on the IT and the BFSI segment which contributed to 46% and 21% respectively.
  3. In H1FY24, the net operating cash flow of the Company was Rs. -18.91 Cr, which was due to a spike in trade receivables of Rs. 84 Cr.
  4. PE Valuation of 39x is quite high for a company that has grown its revenue at a CAGR of just 23% since FY21.

Medi Assist Healthcare Services IPO – GMP 

The shares of Medi Assist Healthcare Ltd traded at a 19.38% premium in the grey market on January 10th, 2024. The shares in Grey Market traded at Rs 499. This gives it a premium of Rs 81 per share over the cap price of Rs 418.

Medi Assist Healthcare Services IPO Review – Key IPO Information

ParticularsDetails
IPO SizeRs. 1,171.58 Cr
Fresh Issue-
Offer for Sale (OFS) Rs. 1,171.58 Cr
Opening date15 January 2024
Closing date17 January 2024
Face ValueRs. 5
Price BandRs. 397 - Rs. 418
Lot Size35 Shares
Minimum Lot Size1 (35 Shares)
Maximum Lot Size13 (455 Shares)
Min. InvestmentRs. 14,630
Listing Date22 January 2024

Promoters: Dr. Vikram Jit Sigh Chhatwal, Medimatter Health Management Pvt Ltd, and Bessemer India Capital Holdings H Ltd.

Book Running Lead Manager: Axis Capital Ltd, IIFL Securities Ltd, Nuvama Wealth Management Ltd & SBI Capital Markets Ltd

Registrar to the Offer: Link Intime India Pvt Ltd

The Objective of the Issue

The main objective of the offer is to provide a timely and profitable exit to the promoters and to achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Conclusion

The Company, Medi Healthcare has found itself a nice sweet spot in being an intermediary between an Insurance Company and a Corporate or individual requiring Insurance. This allows the Company to carve a niche for itself while providing seamless settlement of insurance.

Although the business does seem sound, the valuations demanded by the Company do seem higher. Added to this, H1FY24’s Net Profit is less than half of FY23’s results, signaling a slowdown in earnings.

Keeping all of this in mind, what do you think about the Company? Let us know in the comments below.

Written by Nasir Hussain

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