Inventurus Knowledge (IKS) IPO review (Apply)

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Review By Dilip Davda on December 10, 2024

•    IKS is a technology enabled healthcare solutions provider with a major focus of US, Canada and Australia.
•    It marked steady growth in its top and bottom lines for the reported periods.
•    The company has created a niche place in the segment and gaining grounds.
•    Based on FY25 annualized earnings, the issue appears fully priced.
•    The company is poised for bright prospects ahead with the rising demand for its services in the areas it is operative.
•    Investors may park funds for medium to long term.

ABOUT COMPANY:
Inventurus Knowledge Solutions Ltd. (IKSL) is a technology-enabled healthcare solutions provider and offer a care enablement platform assisting physician enterprises in the US, Canada and Australia, with a focus on the US markets. It is a partner for outpatient and inpatient care organizations, enabling healthcare organizations deliver superior clinical care, improve population health outcomes, and transition to the "fee for value" model while optimizing their revenue and reducing operating costs. 

With the evolution and consolidation of the healthcare industry, it provides solutions that address these increasing tasks, or 'chores', and enable healthcare delivery enterprises to focus on their core focus of healthcare, by taking over chores that are necessary to manage their business. IKSL does this through a blend of pragmatic technology and global human capital, with the aim of enabling healthcare delivery enterprises deliver better, safer and cost-effective care. It offers a comprehensive platform that enables healthcare enterprises across outpatient and inpatient care. Outpatient service facilities, also known as ambulatory care, provide medical care without requiring admission to a hospital or other facility, and include observation, consultation, diagnosis, rehabilitation, intervention, and treatment services. Inpatient care, refers to the provision of medical treatment for patients who have been admitted to a hospital or medical facility, requiring an overnight stay or an extended duration.

As of September 30, 2024, it had 778 healthcare organizations as clients, including health systems, academic medical centres, multi-specialty medical groups, single-specialty medical groups, ancillary healthcare organizations and other outpatient and inpatient healthcare delivery organizations. Some of its key clients include Mass General Brigham Inc., Texas Health Care PLLC, and The GI Alliance Management. IKSL serves its clients through consolidated globalized workforce of over 13,528 employees, including 2,612 clinically-trained employees and a consultative sales force with presence in key geographies in the US, Canada and Australia, as of September 30, 2024. The company acquired Aquity Holdings, a company engaged in technology-enabled clinical documentation, medical coding and revenue integrity solutions for healthcare. Through the acquisition of Aquity Holdings with effect from October 27, 2023, it is able to cross-sell to Aquity's existing base of over 804 customers, as of March 31, 2024, and offer existing solutions to this customer base, thereby increasing IKSL's market
opportunity. The company will also be able to offer the solutions offered by Aquity to its customers, leveraging Aquity's significant experience in clinical documentation, coding and medico-legal documentation solutions, customized to inpatient care.

With its technology capabilities, the company intends to transition Aquity's delivery platform towards being a technology led and human-enabled one, in order to enhance efficiencies of cost. Similarly, it intends to create a more strategic mix of personnel based in the US and in India, to align more closely with its delivery model.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route secondary IPO of 18795510 equity shares (worth Rs. 2497.92 cr. at the upper cap). The company has announced a price band of Rs. 1265 - Rs. 1329 per equity shares of Rs. 1 each. The issue opens for subscription on December 12, 2024, and will close on December 16, 2024. The minimum application to be made is for 11 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 10.96% of the post-IPO paid-up equity capital. This being a pure secondary issue, no funds are going to the company.

The company has reserved 65000 shares for its eligible employees, and from the rest it has allocated not less than 75% for QIBs, not more than 15% for HNIs and not more than 10% for retail investors. 

The joint Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., Jefferies India Pvt. Ltd., JM Financial Ltd., J.P. Morgan India Pvt. Ltd., and Nomura Financial Advisory and Securities (India) Pvt. Ltd., while Link Intime India Pvt. Ltd., is the registrar to the issue. JM Financial Services Ltd. is the syndicate members.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 7.83 - Rs. 824.22 (based on Re. 1 FV) between November 2006 and May 2024. It has also issued bonus shares in the ratio of 1 for 1 in December 2021. It issued bonus shares in the same ratio following conversion of warrants issued to two stakeholders in April 2022 and July 2022. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.49, Rs. 1.50. Rs. 1.91, Rs. 2.24, Rs. 3.45, Rs. 3.60, Rs. 3.73, Rs. 3.82, Rs. 3.83, s. 3.92, Rs. 3.99, Rs. 4.00, Rs. 4.20, Rs. 5.37, Rs. 5.51, Rs. 6.07, Rs. 9.58, Rs. 10.46, Rs. 11.49, Rs. 18.29, Rs. 18.35, Rs. 18.54, Rs. 19.02, Rs. 19.50, Rs. 19.51, Rs. 20.00, Rs.37.60, Rs. 37.88, Rs. 41.95, Rs. 52.50, Rs. 67.95, and Rs. 75.00 per share. 

Post-IPO, its current paid-up equity capital of Rs. 17.16 cr. will remain same as this is a pure OFS, and no funds are going to the company. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 22802.07 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 784.47 cr. / Rs. 232.97 cr. (FY22), Rs. 1060.16 cr. / Rs. 305.23 cr. (FY23), and Rs. 1857.94 cr. / Rs. 370.49 cr. (FY24). For H1 of FY25 ended on September 2024, it earned a net profit of Rs. 208.58 cr. on a total income of Rs. 1294.61 cr. 

For the last three fiscals, the company has posted an average EPS of Rs. 19.69 (basic) and an average RoNW of 34.28 %. The issue is priced at a P/BV of 16.04 based on its NAV of Rs. 82.83 as of September 30, 2024, as well as post IPO-NAV.

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 54.67, and based on FY24 earnings, the P/E stands at 61.56. Thus the issue appears fully priced. 

For the reported periods, the company has posted PAT margins (on restated basis) of 30.51% (FY22), 29.60% (FY23), 20.38% (FY24), 16.26% (H1-FY25), but the RoCE margin data is missing.

DIVIDEND POLICY:
The company has paid a dividend of 1000% (FY23) only as per offer documents. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has no listed players to compare with. 

MERCHANT BANKER'S TRACK RECORD:
The five BRLMs associated with the offer have handled 87 pubic issues in the past three fiscals, out of which 23 issues closed below the offer price on the listing date. 

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