Sagility India IPO analysis

Sagility India IPO (initial public offering) will open for subscription on November 5, 2024 and close on November 7, 2024. Below is a breakdown of the healthcare service provider's strengths, weaknesses and growth prospects to help investors make an informed decision. Sagility India IPO in a nutshell Quality: Between FY22 and FY24, Sagility India reported an average three-year ROE and ROCE of 2 per cent and 3 per cent, respectively. Growth: During FY22-24, its revenue and net profit grew nearly 127 and 590 per cent per annum, respectively. Valuation: Post the IPO, the stock will be valued at a P/E and P/B of 67.5 and 1.9 times, respectively. Overview: Sagility India serves US health insurance companies and healthcare providers (hospitals, physicians and medical device companies). The US had the highest per capita healthcare expenditure among leading economies at over Rs 10 lakh in 2022. The company will benefit from the growth in the US healthcare market, driven by an ageing population and increasing prevalence of chronic diseases. About Sagility India Incorporated in 2021, Sagility India is an IT company operating in the US healthcare segment. With operations spanning 31 branches across five countries, its services to insurance companies include claims management, enrollment, benefits plan building, premium billing and clinical functions. It provides revenue cycle management functions to hospitals. As of FY24, it derives nearly 90 per cent of its revenue from the health insurance companies (payers). Within the healthcare operations outsourced market, the company has a share of approximately 1.18 per cent. Strengths of Sagility India High client stickiness: Sagility India has retained over 90 per cent of its clients during FY23 and FY24. The company also increased its revenue from these retained clients by 10 per cent in FY24. Weaknesses of Sagility India High competition: The healthcare services industry is highly competitive. Sagility India competes with big brands like Accenture, Cognizant, EXL, CorroHealth, Shearwater Health and Omega Healthcare. Increased competition may lead to pricing pressures and loss of potential clients. Dependency on US market: Sagility India earns all of its revenues from clients operating in the US healthcare industry. A decline in the growth of the US healthcare industry or a reduction in outsourcing by US payers and providers will significantly impact the company. Sagility India IPO details Total IPO size (Rs cr) 2,107 Offer for sale (Rs cr) 2,107 Fresh issue (Rs cr) - Price band (Rs) 28 - 30 Subscription dates November 5 - 7, 2024 Purpose of issue The issue is entirely offer for sale Post-IPO M-cap (Rs cr) 14,044 Net worth (Rs cr) 7,608 Promoter holding (%) 85.0 Price-to-earnings ratio (P/E) 67.5 Price-to-book ratio (P/B) 1.9 Financial history Key financials (Rs cr) 2Y growth p.a. (%) TTM FY24 FY23 FY22