IPO: Jupiter Life Line Hospitals

Jupiter Life Line Hospitals, a multi-specialty tertiary and quaternary healthcare provider, has come out with its IPO (initial public offering). Here's a breakdown of the hospital's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality : Jupiter Life Line Hospitals' three-year average return on equity (ROE) and return on capital employed (ROCE) are 12.3 and 14.4 per cent, respectively. Moreover, it has also generated free cash flow in FY22 and FY23. Its FY21 business was impacted due to COVID-19-related restrictions which led to a decline in patient volumes and occupancy levels. Growth : Its topline grew by 21.7 per cent and 50.8 per cent in FY23 and FY22 respectively, driven by an increase in both inpatient and outpatient income. This is primarily because of the recommencement of surgical procedures, increase in patient inflows and increase in health check services. Moreover, increasing non-communicable diseases (NCDs) coupled with an increase in medical tourism in India will help it to grow further. Valuation : The stock will be priced at a P/E and P/B of 66.1 and 5.3 times, respectively, as compared to its peer's median and average of 46.1 and 7.8 times, respectively. Overview : The need for healthcare centres will rise with a continuous increase in illness (mainly non-communicable diseases) over the last few years primarily because of factors like unhealthy diet, high blood pressure, high blood sugar, high cholesterol and others. This will help the hospitals (especially tertiary and healthcare hospitals) to grow their operations further. While the debt burden on the hospital will be reduced by utilising the net process from IPO, the impact of any change in regulations (with respect to quality and pricing violations) will remain a key monitorable. About Jupiter Life Line Hospitals Jupiter Life Line Hospitals is a multi-specialty tertiary and quaternary (advanced healthcare services) healthcare provider. It currently operates three hospitals in Thane, Pune and Indore (operational bed capacity of 950 beds and 1306 doctors; FY23) under the "Jupiter" brand which caters to over 30 key specialities like bariatric surgery, cardiology, etc., and is also developing a hospital in Dombivli to accommodate over 500 beds. Moreover, it has also set up a hotel (Fortune Park Lake City) in collaboration with the ITC group to promote medical tourism. Strengths of Jupiter Life Line Hospitals Low penetration of chained hospitals coupled with high population density and increasing penetration of health insurance in the western region of India will provide this healthcare hospital further room to grow (As per CRISIL report). A very low reliance on government schemes for revenue (1.09 per cent in FY23) such as ECHS, CGHS, EHS, West Bengal Swasthya Sathi and Ayushman Bharat. Weaknesses of Jupiter Life Line Hospitals It draws most of its revenue from its Thane hospital (more than 50 per cent in FY23). Thus, any slowdown in the Thane operations will significantly impact its topline. Hospitals are highly exposed to maintaining quality (utmost priority) and pricing regulations. Thus, any kind of issues with respect to non-compliance with quality standards or violation of pricing regulations can significantly impact the operations. IPO details Total IPO size (Rs cr) 869 Offer for sale (Rs cr) 327 Fresh issue (Rs cr) 542 Price band (Rs) 695-735 Subscription dates September 6-8, 2023 Purpose of issue To repay debt Post-IPO