Metropolis Healthcare IPO Review

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Metropolis Healthcare IPO

7.6

Company Background

7.5/10

Price Band

7.0/10

Financial Health

8.0/10

Industry Situation

8.0/10

IPO Proceeds Usage

7.5/10

Pros

  • Established Brand Name
  • Wide Network
  • Huge Range of Tests & Profiles
  • Good IT Infrastructure

Cons

  • Competitive Market Space
  • Third-Party Dependencies

Metropolis Healthcare Limited Basic Details

 

Metropolis Healthcare Limited Background

Metropolis Healthcare is one of the leading Diagnostics company in India in terms of revenue (as per Source – Frost & Sullivan).

They have a widespread network spread in around 773 cities all over the country and provide a detailed range of around 3480 clinical laboratory tests and 524 profiles used in predicting, detection, screening, confirmation and monitoring the diseases.

Tests conducted by the company are classified into three categories:

  • Routine tests like urine exams, blood cell counts, etc.
  • Semi specialised tests like thyroid, infectious disease tests, etc. and
  • Specialised tests like autoimmunity tests and cytogenetics & molecular diagnostics, etc.

The company has a total of 126 laboratories which are categorised into four groups:

  • Global Reference Laboratory – This is the major laboratory where the majority of the tests are conducted and is located in Mumbai.
  • Regional Reference Laboratories – These are 12 in number, 10 in India and 2 abroad. Routine, semi specialised and a few specialised tests are conducted here.
  • Satellite Laboratories – These are 50 in number, 46 in India and 4 abroad. These conduct routine and semi specialised tests.
  • Express Laboratories – These are 43 in number, 32 in India and 11 abroad. They conduct routine tests.

The company caters to an individual as well as institutional customers. It has been awarded the tender by the National Aids Control Organisation. The company reported 7.7 million patient visits and conducted 16 million tests in the year 2018.

This healthcare company is going to launch an IPO in the next few days and we will be reviewing all the facts and data points related to this IPO.

Metropolis Healthcare IPO Data Points

Metropolis Healthcare IPO will open on (undisclosed) and close for subscription on (undisclosed).

The IPO size will be of 1,52,69,684 Equity shares and the face value of each share will be ₹2. The IPO price band has been set at ₹(undisclosed) – ₹(undisclosed) per equity share. The offer price includes a premium of ₹(undisclosed) and is (undisclosed) times the face value of the equity shares.

The IPO size is expected to be over ₹1000 crores.

The issue consists of an offer for sale of shares by selling shareholders:

  • Up to 50,17,868 equity shares are being offered by Dr Sushil Kanubhai Shah, aggregating up to ₹(undisclosed) lakhs,
  • up to 1,02,51,816 equity shares, aggregating up to ₹(undisclosed) lakhs are being offered by CA Lotus Investments.

Up to 3,00,000 shares, aggregating up to ₹(undisclosed) lakhs will be reserved for subscription by eligible employees. The market lot size is of (undisclosed) equity shares and the shares will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Pursuant to a resolution passed on September 24, 2018, and September 27, 2018, the offer has been authorised by the Board of Directors.

The offer has been approved by Dr Sushil Kanubhai Shah through a consent letter dated September 24, 2018, and by CA Lotus Investments through consent letters dated September 7, 2018, and September 27, 2018.

Metropolis Healthcare Limited Financial Performance

The company has been showing good financial performance over the last 3 years.

Revenues have increased from ₹490.6 crores in the financial year ended March 31, 2016, to ₹651.56 crores in the financial year ended March 31, 2018.

PAT has also increased from ₹81.96 crores to ₹109.75 crores during the same period.

The return on net worth of the company for the years ended March 31, 2018, March 31, 2017, and March 31, 2016, is 24.66%, 31.46% and 27.55% respectively. As of March 2018, on a consolidated basis, the net asset value per equity share is ₹83.58.

Metropolis Healthcare IPO Objectives

The proceeds from the offer for sale of equity shares will be given to the selling shareholders. Any proceeds from the offer for sale will not be received by the company for its operations.

Other than this, the company will also benefit in terms of enhanced corporate image, brand name and increased visibility through Metropolis Healthcare IPO.

Metropolis Healthcare IPO Events

Here is a quick look at the specific dates related to the Metropolis Healthcare IPO that you must be aware of, in case you are interested in investing in this particular IPO:

Filing of Draft Red Herring Prospectus (DRHP) September 27, 2018
Anchor List TBA
IPO Open Date TBA
IPO Close Date TBA
Finalization of Basis of Allotment TBA
Credit to Demat Accounts TBA
Listing at BSE and NSE TBA

 

Metropolis Healthcare IPO Recommendation

Before deciding whether to invest in the Metropolis Healthcare IPO or not, let us discuss some of the key strengths and risks related to the business of the company.

The company is an established brand name diagnostics industry in India and has won several awards that prove their focus on quality and reliability of their tests.

Its operations are spread across 18 Indian states and their operational network consists of 69 Laboratories, 967 patient touch points and 314 ARCs in the Western and Southern parts of India.

The company provides a huge range of tests and profiles ranging from simple biochemistry tests to high-end advanced molecular diagnostic tests.

Their focus on customer service is another added advantage for their business and will help in achieving better financial health.

The company is also equipped with good information Technology infrastructure which helps in improving the efficiency of its operations.

It also possesses an established track record of successful acquisitions of other companies in the same sector operating in India and abroad.

Now, let us discuss some of the risks related to the business of the company.

The company has not been able to report the results of their associate company named star Metropolis health services Middle East LLC, in which Metropolis Healthcare owns a 34% equity interest, because of certain disagreements.

The business and future profitability of the company depend on their ability to grow and maintain their brand image which depends on many factors like quality accuracy, etc.

If the company feels to meet standards of quality services provided to its customers, its operations may be adversely affected. The company is also exposed to the risk of failure or delay in delivery of specimens to their Laboratories which could ultimately result in a negative impact on their business and results.

Any loss of business in West and Southern parts of India may affect the results of the company significantly because the company’s operations are concentrated mainly in those areas.

Dependence on third parties for some part of their business is another major risk factor. Healthcare business is regulated by many laws, rules and regulations. Any changes in them or non-compliance may adversely affect the financial health of the company.

The nature of the business is such that they require some permits, approvals, licences and registrations for normal functioning. Any failure in obtaining, renewing or retaining them may adversely affect the financial health of the company.

The company also faces severe competition from local and branded players in this industry. The company, its subsidiaries, promoters, Directors, etc. are involved in certain legal proceedings and any adverse ruling in them may pose a risk to the overall profitability of the company.


After analysing various aspects of the company, it can be said that investors may choose to subscribe to the Metropolis Healthcare IPO.


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Metropolis Healthcare Limited Management Background

Currently, there are 6 Directors on the Board of Metropolis Healthcare Limited.

Dr Sushil Kanubhai Shah is the Chairman and Executive Director of the company. He possesses a graduate degree in Medicine and Surgery and a degree of Doctor of Medicine in Pathology and Bacteriology from the University of Bombay.

He has an experience of more than 30 years in the field of pathology and has been acknowledged with several awards during his career.

Metropolis Healthcare IPO Advisors Information

JM Financial Limited, Credit Suisse Securities (India) Private Limited, Goldman Sachs (India) Securities Private Limited, HDFC Bank Limited and Kotak Mahindra Capital Company Limited are acting as Book Running Lead Manager to the issue.

Link Intime India Private Limited is acting as the Registrar for the Metropolis Healthcare Limited IPO. Khaitan & Co is acting as legal counsel to Metropolis Healthcare Limited. AZB & Partners is acting as legal counsel as to Indian law and Sidley Austin LLP is acting as international legal counsel to the book running lead managers.

L&L Partners is acting as legal counsel and Clifford Chance is acting as international legal counsel to investor selling shareholder.

Summary
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Metropolis Healthcare IPO
Overall Rating
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