Krishna Institute of Medical Sciences IPO: Information analysis

Krishna Institute of Medical Sciences (KIMS) operates multi-speciality hospitals in Andhra Pradesh (AP) and Telangana. Under Dr B Bhaskara Rao, its founder-promoter, the company has grown from a single hospital in Nellore, AP, with a capacity of 200 beds to nine hospitals across AP and Telangana, with a combined capacity of 3064 beds within two decades. The company offers services across 25 specialities and super specialities and focuses on tier-II and tier-III cities. The company has historically adopted a very calibrated approach while expanding its operations and is now looking to expand to Chennai and Bangalore. It has made a conscious decision to provide services at relatively affordable prices and is able to do so without sacrificing margins, owing to various reasons such as high operating leverage, lower capital and operating costs and the focus on high patient volume. This is the company's second attempt to come out with an IPO after a failed attempt in 2018. During the financial year 2020-21, its revenue was pegged at Rs 1340 crore, while its profit at Rs 279 crore. Strengths Operations in the healthcare sector: Healthcare in India is an underpenetrated sector. Poor ranking on metrics like the patient-to-bed ratio, healthcare spends as a percentage of GDP and costs paid out of pocket mean that there is a long runway for growth. Superior financials: From a financial standpoint, the company boasts of strong metrics such as a high RoCE (28 per cent), low working-capital cycle and negligible debt. Diversification across specialities: The company offers treatment across multiple specialities. Its revenues are fairly distributed across specialities such as cardiac, neuro, renal, ortho, oncology, etc. The company is well-diversified and not much dependent on any particular speciality. Risks and weaknesses High concentration: All the company's hospitals are located in just two neighbouring states. Even among all these hospitals, the company derives almost 65 per cent of its revenue from just one hospital in Secunderabad. Therefore, any adverse circumstances