Global Longlife BSE SME IPO review (Avoid)

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Review By Dilip Davda on April 18, 2022

•    GLHRL is a multi-speciality health care services provider. 
•    Last three fiscal's financial data show inconsistency.
•    Super earnings for FY22 9M raises eyebrows and doubt over window dressing.
•    Despite super earnings, the IPO pricing is very high.
•    There is no harm in ignoring this pricy bet. 

PREFACE:
The company filed its draft prospectus for an IPO of Rs. 49 cr. with NSE for listing on SME Emerge on November 20, 2021, but failing to get clearance till February 2022, it filed a draft prospectus with BSE on March 02, 2022, and got approval soon thereafter to submit its final prospectus with ROC on April 11, 2022. This is a major concern as it shifted to BSE SME from NSE SME listing raising eyebrows about the documents approval process. According to primary market sources, NSE has somewhat stringent criteria for approval of draft documents compared to BSE for SME listings. Should this have bearing on an IPO process is a million-dollar question. 

ABOUT COMPANY:
Global Longlife Hospital and Research Ltd. (GLHRL) is known as a Multi-Speciality Tertiary Care Hospital in Gujarat with 110 beds well equipped for Medical & Surgical Specialities. As a policy, any doctor having experience of more than 3 years can admit his patient to the hospital. It provides a platform for doctors to treat their patients. As of 31st December 2021 apart from the 11 full-time consultants, it has a team of more than 30 experienced doctors as a consultant to serve patients. Its staff strength also comprises 37 nursing staff and more than 50 paramedical, corporate and support staff and pharmacists as on December 31, 2021.

The Company has adopted the Standard Operating Procedures (SOPs) given by the Ministry of Health & Family Welfare. Under the said SOPs every work function of the hospital is defined, every process is written down and every employee is trained in his/her duties as soon as he/she joins. All equipment is maintained as per a predefined schedule. Every necessary license is obtained and renewed as required from time to time.

GLHRL is certified by National Accreditation Board for Hospitals and Healthcare Providers ("NABH Accredited") which is committed to supporting the improvement of the quality of healthcare service in the country for all strata of the population through various methodologies and tools to supplement the efforts of the providers of healthcare service and the requirements of the system at various levels. Through the Mukhya Mantri Amrutum Yojana it has served over 6,000 patients up till now.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for land acquiring on a leasehold (Rs. 20.00 cr.), repayment of loans (Rs. 14.80cr.) and general corporate purpose (Rs. 10.70 cr.), GLHRL is coming out with a maiden IPO of 3500000 equity shares of Rs. 10 each at a fixed price of Rs. 140 per share to mobilize Rs. 49.00 cr. The issue opens for subscription on April 21, 2022, and will close on April 25, 2022. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 38.29% of the post issue paid-up capital of the company. GLHRL is spending Rs. 3.50 cr. for this IPO process. 

The IPO is solely lead managed by Interactive Financial Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this company. 

Having issued most of the equity shares at par, the company has also issued some equity portions at a price of Rs. 15 per share in October 2012. The average cost of acquisition of shares by the promoters is Rs. 2.92 and Rs. 20.69 per share. 

Post-IPO, GLHRL's current paid-up equity capital of Rs. 7.00 cr. will stand enhanced to Rs. 10.50 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, GLHRL has posted total revenue/net profits of Rs. 34.70 cr. / Rs. 1.36 cr. (FY19), Rs. 33.66 cr. / Rs. - (0.86) cr. (FY20) and Rs. 32.77 cr. / Rs. 1.04 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 3.86 cr. on a revenue of Rs. 26.74 cr. After an inconsistent performance for the previous three fiscals, a quantum jump in the bottom line for the current fiscal partial operation raises eyebrows. This leads to doubt for some window dressing in its financial performance in the IPO year to get better valuations and lure investors. 

For the last three fiscals, GLHRL has reported an average EPS of Rs. 0.75 and an average RoNW of 4.84%. The issue is priced at a P/BV of 7.41 based on its NAV of Rs. 18.89 as of December 31, 2021, and at a P/BV of 2.54 based on its post-IPO NAV of Rs. 55.21 per share. 

If we annualize FY22 earnings and attribute it to the fully diluted post IPO equity capital then the asking price is at a P/E of 38.04 and if we take FY21 earnings, then the asking price is at a P/E of 140. Thus the IPO is priced exorbitantly. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported period of the offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, GLHRL has shown Aashka Hospitals and KMC Speciality Hospitals as its listed peers. They are currently trading at a P/E of 27.64 and 42.43 (as of April 18, 2022). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORDS:
This is the 2nd mandate from Interactive Financial in the last two fiscals (including the ongoing one). The only listing that took place opened at a discount of 50% on a listing day. Thus it has a very poor track record so far. 

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