GPT Healthcare IPO booked 61% on Day 2: Should you buy into the Rs 525.14-cr issue?

The public issue of GPT Healthcare was subscribed nearly 61 percent so far on February 23, the second day of bidding. Several analysts have assigned a ‘subscribe’ rating to the issue in view of its reasonable valuation, strong presence in Eastern India, and decent return ratios.

The price band for the IPO, which will close for subscription on February 26, has been fixed at Rs 177-186 per share. The company aims to raise around Rs 525.14 crore through the fresh issue of 21.5 lakh shares worth Rs 40 crore and an offer-for-sale of 2.6 crore shares worth Rs 485.14 crore.

BanyanTree Growth Capital-II LLC will be selling its entire shareholding of over 2.60 crore equity shares, representing 32.64 percent of the paid-up equity. With this, the Mauritius-based private equity fund will exit the company.

The business

GPT Healthcare (ILS Hospitals) is one of the key regional corporate healthcare companies in Eastern India in terms of number of beds and hospitals as of fiscal year 2023. The company runs a chain of mid-sized full-service hospitals under the brand and provides integrated healthcare services, with a focus on secondary and tertiary care.

As of September, they had four multispecialty hospitals in Dum Dum, Salt Lake and Howrah in West Bengal and Agartala in Tripura with a total capacity of 561 beds.

Anchor investors

GPT Healthcare mobilised Rs 157.54 crore from anchor investors on February 21, ahead of the IPO float. Marquee foreign and domestic institutional investors invested in the company through the anchor book included Societe Generale, Kotak Mutal Fund, Axis Mutual Fund, Bandhan Duro One Investments, Copthall Mauritius, Kotal Mutual Fund, Aditya Birla Life Insurance, LC Pharos Multi Strategy Fund, and DE Shaw Valence International.

Financials

GPT Healthcare reported a profit after tax of Rs 23.48 crore in H1FY24, 38.2 higher than the year-ago period, while its revenue surged 18.7 percent to Rs 204.17 crore in the same period. The company's EBITDA margin improved to 22.34 percent and PAT margin to 11.36 percent, while its RoE and RoCE were at 13.6 percent and 14.8 percent in the six months ended September 2023. The debt-to-equity ratio stood at 0.32 times.

Should you subscribe to GPT Healthcare IPO? Let's check out what brokerages say about the issue...

Mehta Equities: High-risk investors can subscribe

Given its healthy regional presence in Eastern India and strategically situated hospitals offering a comprehensive array of medical specialities, GPT Healthcare is positioned to seize opportunities in underserved healthcare markets and strategically grow in the adjacent markets with asset-light business models like Ranchi.

“Investors should also look at IPO offers which come with 100 percent OFS issue which is an area of concern for new investors. Hence, considering all parameters we recommend only high-risk investors to ‘subscribe' for the long-term, while conservative investors can wait and watch the space post-listing,” analysts at Mehta Equities wrote.

Nirmal Bang: Subscribe for long term

GPT Healthcare will be an almost debt-free company after the reduction of overall borrowings by Rs 30 crore through its funding from fresh issues. Its topline recorded a CAGR of 19 percent and EBITDA a CAGR of 28 percent between FY20 and FY23.

“The issue is valued at 17.9x FY24 annualised EV/EBITDA which is at a discount to the industry average. Thus, we recommend ‘Subscribe for long term’ to the issue,” the Nirmal Bang analysts wrote in a note.

Anand Rathi: Subscribe for long term

At the upper price band, the company is valued at a P/E of 39.1x with a market cap of Rs 1,526.2 crore post-issue of equity shares and a return on net worth of 23.7 percent in FY23. On the valuation front, we believe that the company is fairly priced. Thus, we recommend a 'subscribe – long term' rating for the IPO,” wrote the analysts at Anand Rathi.

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