Shalby Limited IPO - 10 things to know

1. No matter what is the crude price per barrel as on any date, no matter how much dollar has strengthened against rupee over a period, no matter why North Korea is terrifying US by test of its new missiles every other day, no matter  when and how GST would benefit to country people,  no matter what goes worse or better within or outside India, if you are dying you have to be admitted in a hospital to get cured and pay mammoth hospital bills in return. Shalby Limited is in the business of saving life, curing illness and pains in your body. Healthcare industry will never have  impact of  whatsoever socio, political or economic changes. You have to spend money for the treatment no matter which government is in power, you have to spend behind health care without giving damn to GST rate once you or your dear one is on the death bed. This industry is never going to be hit by recession. NEVER

2. Ahmedabad based Shalby Limited is into the business of operating multi specialty hospitals. Shalby Limited has come up with approx 505 Crore IPO. The issue is opening on 05.12.2017 and closing on 07.12.2017. The tentative date of allotment is December 12,2017 and listing is December 14,2017. This is the first IPO of December 2017, and the very next day Future Supply Chain Solutions Ltd IPO is also opening. 

3. This IPO is mix of Fresh Issue and Offer for sale. The company will raise Rs  480 Crore approx through Fresh Issue and 24.8 Crore through Offer For Sale.     

4. Object of the issue : The company shall not receive any proceeds generated from the offer for sale. The company proposes to utilize the net proceeds from the Fresh Issue towards the following objects:

a. Repayment or prepayment in full or in part of certain loans availed by the company

b. Purchase of medical equipment for existing, recently set up and upcoming hospitals

c. Purchase of interiors, furniture and allied infrastructure for upcoming hospitals and

d. General corporate purposes

Out of 480 Crore approx, Rs 75 Crore shall be used for expansion.  Rs. 300 Crore approx ( 63%) shall be used for repayment or payment of loans availed by the company. 

4. Pricing of share :  PE for the Fiscal 2017 was Rs.7.16. The company has set price range between Rs 245 - Rs 248 per share. PE at lower and upper price band ranges between 34.22 - 34.64.  Share price is pretty reasonable. On book value front, as on 31.03.2017, book value of share was Rs. 30.4. If we take lower and upper price band, the company has asked 8.05 - 8.16 times of book value. From this point also, share price is reasonable.

5.  Promoted by Zodiac Mediquip Ltd and Dr Vikram Shah,  the company has managed to make its space consistently in healthcare industry. The company's revenues have grown from 225.13 Crore in 2013 to 325.39 Crore in 2017. The PAT has risen from 17.10 Crore to 62.56 Crore for the same period. The % of return on Networth rose from 16.72% in 2013 to 23.54%. From this from, share price set is very much reasonable. One should apply the IPO.

6. Comparison with peers :  Shalby Ltd's listed peers are Apollo Hospitals, Fortis Healthcare, Narayana Hrudayalaya and Healthcare Global Enterprises. Shalby Ltd's comparison with giants like Apollo, Fortis and Narayana creates a vague comparison as all these companies are too big in terms of revenues. However, Healthcare Global is little comparable. Shalby Ltd is the smallest company in comparison to all. The comparison is given below:

From PE front, Fortis Healthcare is under priced. On the other hand, Apollo, Narayana and Healthcare Global seem to be over priced. Shalby Limited share is much reasonable.  Further, none of Shalby Ltd's peer has RoNW in double digits, while Shalby Ltd has 23.5%.  From book value angle, Shalby Ltd's share is littler expensive, however, other figures outshines.

7. Competitive strengths of  Shalby Ltd : Leadership in orthopedics and strong capabilities in other specialties, integrated and scaleable business model enhancing its patient reach, experience player with longstanding presence and brand recall, track record of operating and financial performance and growth, ability to attract quality doctors,nurses, paramedical, and other staff, experienced and qualified professional management team with strong execution track record.

8. Led by Dr Vikaram Shah, an orthopedic surgeon with more than 25 years of professional experience, it has grown from a single hospital to a chain of multi-specialty hospitals. As on June 30,2017, it had nine operational hospitals with an aggregate operational bed count of 841 beds. It had a 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016.

9. Headquartered in Ahmedabad, India, it has a domestic and overseas outreach through a network of hospitals in India and Outpatients Clinics and SACE (Shalby Arthroplasty Centre of Excellence) located in India, Africa and Middle East. Having strong presence in western and central India and focus on Tier I & Tier II cities, its hospitals operates across five states, its outpatients clinics operates across 37 cities in 12 states in India, and its SACE are present in 7 cities in six states in India. Its international foot print consist of five Outpatients clinics and one SACE in Africa, and two SACE in UAE. It is expanding its footprints in western and central India with hospitals being set up in Nashik and Vadodara.

10. Shalby Ltd operates and expands its business through a combination of the following models:
a. owning and operating multi-specialty hospitals;
b. operating and managing hospitals on a revenue sharing basis, by adopting an asset light model;
c. associating with third party hospitals on a revenue sharing and/or professional fees basis to offer orthopedic healthcare services under SACE; and
d. providing orthopedic healthcare services through Outpatients clinics that are either independently operated by them, or operated by them within third party premises on a revenue sharing basis.

Conclusion:
The company has been growing steadily. The statistics of the company are impressive and top of that the company has set a reasonable price. I would recommend to apply this IPO.

Thank you for reading...Jai Hind

CA Prashant Seta
(Note : I write review based on my knowledge and understanding. The reader of this article should do his/her own research before applying)