Jupiter Life Line IPO review (Apply)

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Review By Dilip Davda on September 1, 2023

•    JLLHL is a chain of hospitals in densely populated MMR regions.
•    It suffered a minor setback for FY21 on account of the Pandemic.
•    The company has posted steady growth in its top and bottom lines.
•    Based on FY23 earnings, the issue is fully priced. 
•    Investors may apply for medium to long-term rewards.

PREFACE:
JLLHL has done a pre-IPO placement of Rs. 123.00 cr. at a price of Rs. 735 per share for 1673469 shares in August 2023, and has also increased the fresh equity issue worth Rs. 50 cr. Resultantly, now the fresh equity issue will be for Rs. 542 cr., out of which over 95% will be used to reduce the entire debt.  Post IPO, it will be a debt-free company and will save a huge amount on finance costs. With additional capacities in operations in the next two years, it will reap the benefit of higher revenues. "Jupiter" is a well-known brand in healthcare services.

ABOUT COMPANY:
Jupiter Life Line Hospitals Ltd. (JLLHL) is among the key multi-speciality tertiary and quaternary healthcare providers in the Mumbai Metropolitan Area (MMR) and western region of India with a total bed capacity of 1,194 hospital beds across three hospitals as of March 31, 2023 (Source: CRISIL Report). It has been operating for over 15 years as a corporate quaternary care healthcare service provider in densely populated micro markets in the western regions of India and currently operates three hospitals under the "Jupiter" brand in Thane, Pune and Indore, with an operational bed capacity (i.e. census and non-census beds) of 950 beds and 961 beds, as of March 31, 2023, and as of the date of this Red Herring Prospectus, respectively, and 1,306 doctors including specialists, physicians and surgeons, as of March 31, 2023. 

JLLHL is also currently in the process of developing a multi-speciality hospital in Dombivli, Maharashtra, which is designed to accommodate over 500 beds and has commenced construction in April 2023. It follows a 'patient first' ideology by creating the best infrastructure, technology and support to put the patient first and foremost and be futuristic and innovative in the delivery of healthcare. It has equipped hospitals with over 30 key specialties, as of March 31, 2023,

According to the CRISIL Report, its Thane and Indore hospitals are among the few hospitals in the western region of India to provide neuro-rehabilitation services through a dedicated robotic and computer-assisted neurorehabilitation centre. Additionally, the company operates one of the few multi-organ transplant centres in Thane (Source: CRISIL Report). Each of its hospitals at Thane, Pune and Indore has been certified by the National Accreditation Board for Hospitals & Healthcare Providers ("NABH") and has been accredited in the field of medical testing by the National Accreditation Board for Testing and Calibration Laboratories ("NABL"). 

It commenced operations in 2007 with a hospital in Thane, Maharashtra and subsequently scaled its operations by setting up a hospital in Pune, Maharashtra in 2017 and acquiring a hospital in Indore, Madhya Pradesh in 2020. According to the CRISIL Report, its hospitals are also located in densely populated micro markets which have a low presence of chained hospitals. JLLHL's hospitals function on an 'all-hub-no-spoke' model with each hospital being a full-service hospital, operating independently and serving the healthcare needs of patients, right from diagnostics to surgery and rehabilitation. Thane and Pune hospitals are "greenfield" projects, and all three of its hospitals are located on land owned by it on a freehold basis.

Patient volumes (comprising inpatient and outpatient) at JLLHL hospitals were 447,573, 645,446 and 773,937 in Fiscals 2021, 2022 and 2023, respectively. JLLHL is a corporate quaternary care hospital located in densely populated micro markets in the western region with a total bed capacity of 1,194 hospital beds across three hospitals as of March 31, 2023. 

In Fiscals 2021, 2022 and 2023, the attrition rate for doctors (who work as consultants at our hospitals) was 3.40%, 5.08% and 1.85%, respectively, while the attrition rate for nurses was 26.58%, 31.81% and 27.97%, respectively, in the same periods. JLLHL is also in the process of developing a multi-specialty hospital in Dombivli, Maharashtra. As of March 31, 2023, it had 3183 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo book building route IPO of fresh equity shares issue worth Rs. 542.00 cr. and an offer for sale (OFS) of 4450000 equity shares. The company has announced a price band of Rs. 695 - Rs. 735 per share of Rs. 10 each. At the upper cap, JLLHL will issue approx. 7374160 equity shares and its OFS will fetch Rs. 327.08 cr. The overall IPO size will be 11824160 equity shares worth Rs. 869.08 cr. The issue opens for subscription on September 06, 2023, and will close on September 08, 2023. The minimum application to be made is for 20 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 18.03% of the post-IPO paid-up equity capital of the company. The company has allocated not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors. 

From the net proceeds of the fresh equity shares issue, the company will utilize Rs. 510.41cr. for repayment/prepayment of borrowing, and the rest for general corporate purposes. 

ICICI Securities Ltd., Nuvama Wealth Management Ltd., and JM Financial Ltd. are the joint Book Running Lead Managers (BRLMs) and KFin Technologies Ltd. is the registrar of the issue. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 12.50 - Rs. 735 per share between May 2007 and August 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 7.71, Rs. 8.17, Rs. 10.00, Rs. 11.00, Rs. 13.00, Rs. 15.00, Rs. 23.00, Rs. 31.15, Rs. 60.29, and Rs. 75.00 per share. 

Post-IPO, JLLHL's current paid-up equity capital of Rs. 58.19 cr. will stand enhanced to Rs. 65.57 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 4819.10 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, JLLHL has (on a consolidated basis) posted a total income/net profit - (loss) of Rs. 490.27 cr. / Rs. - (2.30) cr. (FY21), Rs. 737.14 cr. / Rs. 51.13 cr. (FY22), and Rs. 902.96 cr. / Rs. 72.91 cr. (FY23). The company suffered a minor setback for FY21 due to the pandemic. 

For the last three fiscals, the company has reported an average EPS of Rs. 9.62 (diluted basis) and an average RoNW of 15.77%. The issue is priced at a P/BV of 11.41 based on its NAV of Rs. 64.39 as of March 31, 2023, and at a P/BV of 4.68 based on its post-IPO NAV of Rs. 156.93 per share (at the upper cap).

If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 66.10. Thus the issue appears fully priced discounting all near-term positives. However, post-IPO, it will be a debt-free company generating more cash with savings in finance costs. 

For the last three fiscals, its PAT margins were - (0.47) % (FY21), 6.94% (FY22), and 8.07% (FY23) and its RoE margins were - (0.93) %, 17.73%, and 20.03% for the respective fiscals. Thus the company has posted improved performance for the reported periods. 

DIVIDEND POLICY:
The company paid a dividend of 10% for FY23. It adopted a prudent dividend policy in March 2023, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, JLLHL has shown Apollo Hospitals, Fortis Healthcare, Max Healthcare, Narayana Hrudayalaya, Global Health and Krishna Institute as their listed peers. They are currently trading at a P/E of 71.74, 214.62, 78.27, 70.35, 65.46, and 60.75 (as of September 01, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The three BRLMs associated with the offer have handled 83 public issues in the past three fiscals, out of which 27 issues closed below the offer price on the listing dates. 

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