Jupiter Hospitals: Jupiter Hospitals fully priced, may turn reasonable post-IPO

ET Intelligence Group: Jupiter Life Line Hospitals (JLLH) is a regional hospital chain in western India having four super speciality hospitals in Thane, Pune, Indore, and Dombivli, respectively, is launching an initial public offer to raise ₹869 crore. The proceeds from the issue will be used to repay ₹510 crore debt. Last month, the company raised ₹123 crore in its pre-IPO placement at the same level as the upper price band. The promoter family is not selling its shares in the issue.

Business: Established in 2007 by Dr Ajay Thakker, JLLH is a chain of multi-speciality tertiary and quaternary hospitals with a total bed capacity of 1,194 across the three hospitals in Thane, Pune (set up in 2017) and Indore (acquired in 2020) as of FY23. The company is currently in the process of developing a multi-speciality hospital in Dombivli, a suburb near Mumbai, with a capacity of 500 beds.

The hospital chain has seen a steady improvement in its operational parameters over the past three years. The inpatient volume nearly doubled from 24,553 patients in the Covid-impacted FY21 to 42,956 patients in FY23. Operational bed capacity increased from 744 to 950 beds. The average occupancy rate improved from 45% to 63%. Average revenue per occupied bed climbed from ₹43,946 to ₹50,990. The average length of stay reduced from 4.5 days to 4.02 days. Consequently, the operating profit (Ebitda) margin improved from 14.5% to 23.45%.

Jupiter’s Thane hospital has a luxury hotel attached to it, managed by a third party. It supports the company’s medical tourism initiatives and earned ₹12 crore income in FY23.

Financials & Growth Prospects: FY21 being a Covid-impacted year, the company’s revenues have increased from ₹486 crore in FY21 to ₹892 crore in FY23. From a loss of ₹2 crore in FY21, the net profit grew to ₹72.9 crore in FY23. The return on capital employed improved from 6% to 21% and the return on equity swung from negative to 20% during the three-year period. The ramp-up of the Indore and Dombivli facilities will eventually reduce dependence on the flagship Thane hospital.Valuations: The IPO values JLLH aggressively at 65.5 times its earnings for FY23, fully pricing in its growth potential. However, with the company becoming debt free after the IPO, it will save over ₹40 crore of finance cost that will shore up its bottomline. The valuations, thus, could turn reasonable after the IPO.

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