Multi-specialty gynecology hospital chain Rainbow Children’s Medicare will be the second public issue getting launched in the coming week, after Campus Activewear. Both IPOs will close in the same week.
Here are 10 key things to know before subscribing to the Rainbow public issue:
1) IPO dates
The initial public offering (IPO) will open for subscription on April 27, and the last date will be April 29. Anchor investors can participate in the offer for a day on April 26.
2) Price band
The company, in consultation with merchant bankers, has fixed the price band at Rs 516 to Rs 542 per equity share for the offer.
3) Public issue details
The company intends to garner Rs 1,580.84 crore through the public issue at the upper price band. The IPO comprises a fresh issue of shares aggregating to Rs 280 crore and an offer-for-sale (OFS) of up to 2.4 crore equity shares by promoters and investors.
Promoters Ramesh Kancharla, Dinesh Kumar Chirla, and Adarsh Kancharla will offload a total of 87.26 lakh equity shares through the OFS. Investors British International Investment Plc (formerly known as CDC Group Plc), and CDC India will sell 1.46 crore equity shares via the OFS.
The company has also reserved three lakh equity shares out of the total offer, for its employees who will get those shares at a discount of Rs 20 per share to the final issue price.
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4) Objectives of issue
Out of the net fresh issue proceeds, Rainbow will spend Rs 40 crore to redeem its NCDs, and Rs 170 crore to set up new hospitals and purchase medical equipment. The OFS money will go to the selling shareholders.
5) Lot size and reserved portion for investors
The company has reserved half of its public issue for qualified institutional buyers, 15 percent for non-institutional investors, and the balance 35 percent for subscription by retail investors.
The minimum number of equity shares to be applied by investors would be 27 and in multiples of 27 shares thereafter. Hence, the minimum investment by retail investors would be Rs 14,634 for a single lot (27 shares) and Rs 1,90,242 for maximum investment in 13 lots, as retail investors are allowed to invest only up to Rs 2 lakh.
6) Company profile
Under the leadership of Dr. Ramesh Kancharla, the founding promoter, Rainbow started off as a 50-bed paediatric hospital in Hyderabad, Telangana, in 1999, to address the opportunity to provide paediatric healthcare. Currently, it operates a multi-specialty paediatric and obstetrics and gynaecology hospital chain in India, with 14 hospitals and three clinics in six cities. It has a total bed capacity of 1,500 beds, with 641 full-time doctors and 1,947 part-time/visiting doctors as of December 2021.
Going forward, it may seek to expand the hospital network through acquisition of brownfield assets or development of greenfield assets.
The company claims that it has successfully executed a hub-and-spoke model at Hyderabad, Telangana. It is implementing a similar hub-and-spoke model in Bengaluru, Karnataka, as well, and also plans to replicate this model in Chennai, Tamil Nadu, and New Delhi-NCR, where it has hub hospitals, by adding spokes in these cities.
CRISIL Research expects the paediatric healthcare market in India to grow from Rs 1.01 lakh crore as of March 2021 to Rs 2.1 lakh crore by the end of financial year 2026, at a CAGR of 13 percent, while the maternity healthcare market in India could grow at a CAGR of 9.42 percent, from Rs 37,800 crore in FY21 to Rs 59,300 crore in FY26.
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7) Financial performance
The gynaecology hospital chain clocked a massive 228 percent year-on-year growth in profit at Rs 126.4 crore for the nine-month period ended December 2021, and revenue jumped 56.6 percent to Rs 761 crore during the same period.
But, profit for the year ended March 2021 declined 28.5 percent to Rs 39.57 crore compared to the previous year, and revenue slipped 9.6 percent to Rs 650 crore in the same period.
As of December 2021, its borrowings (current and non-current) stood at Rs 40.68 crore on a consolidated basis.
8) Promoters and management
Promoter Dr Ramesh Kancharla is the Chairman and Managing Director of the company, possessing over 23 years of experience in the United Kingdom and India in paediatrics, paediatric gastroenterology, liver diseases and liver transplantation segments.
The other promoter Dr Dinesh Kumar Chirla is a Whole-time Director on the board, who is a trained neonatologist. Mahesh Madduri, Head of Strategy, is a qualified Chartered Accountant and holds an MS Industrial Administration degree from Carnegie Mellon University, Pittsburgh, Pennsylvania. Dr Rohit Manipal Bhojaraj, Chief Operating Officer, is a qualified physician and management professional from Indian Institute of Management, Ahmedabad, with over 16 years of experience in the global healthcare sector.
Gowrisankar R, Chief Financial Officer, is a qualified Chartered Accountant and possesses two decades of experience in finance and accounting in the Indian healthcare industry.
Promoters held 62.19 percent equity stake in the company. Rainbow is backed by financial investor CDC, the development finance institution of the UK, which has 30.45 percent shareholding in the company.
9) Risks and concerns
a) Any adverse regulatory changes in the healthcare industry could adversely affect Rainbow’s business, results of operations and cash flows.
b) There are outstanding legal proceedings of Rs 25.38 crore against the company.
c) Its business is subject to seasonality. It typically has fewer patient visits during March to May, which are the school examination and vacation periods.
d) Its revenues are highly dependent on hospitals in Hyderabad and Bengaluru.
e) The company faces intense competition from other healthcare service providers.
10) Allotment and listing dates
Rainbow will finalise its IPO share allotment by May 5, while it will credit refunds to bank accounts of unsuccessful investors by May 6. Equity shares will be credited to demat accounts of eligible investors by May 6.
Equity shares will make a debut on the BSE and the NSE on May 10.
The book-running lead managers to the issue are Kotak Mahindra Capital Company, JP Morgan India, and IIFL Securities, while KFin Technologies is the registrar to the issue.
