KIMS IPO: Should you invest or not?

The pandemic has proven to be disastrous for the majority of the nation. But it surely did favor a few sectors like healthcare and pharmaceuticals. It might not seem like the best thing to have happened, but companies in these sectors did enjoy significant financial benefits when we look at it purely from a business perspective.

Among these is one of the most famous hospital chains of South India, which announced the release of its IPO to be on 16th June 2021. “KIMS Hospitals” is being added to the never-ending list of IPOs releasing this year.

If you are looking for an IPO to park your excess funds, continue reading to understand the nuances of this IPO and then, take your call!

KIMS Hospitals - Company details

Founded by Bhaskara Rao Bollineni in 2000 in Nellore, India, Krishna Institute of Medical Sciences (KIMS) is a hospital chain based in Telangana and Andhra Pradesh. KIMS currently has nine hospitals operating in these two states. It is one of the very few hospitals in India to focus on robotic surgeries. It set up South India’s first robotic facility.

KIMS offers healthcare services in cardiothoracic and cardiovascular surgery, cardiology, dermatology, dental, plastic surgery, neurology, and the list just continues. It is famously known for organ transplantation. In 2019, KIMS recorded a record 1,000 kidney transplant surgeries.

KIMS has received many awards for its efficient operations and excellent healthcare facilities. Post-issue, the promoter shareholding will drop from 46.8% to 38.8%, and the public holdings increase from 53.2% to 61.2%.

Growth strategy of KIMS

The company is focusing on strengthening by balancing its speciality mix and deepening its expertise in select specialities. It is also planning to expand its operations which are currently limited to Andhra and Telangana, to other Indian cities like Chennai, Bangalore, greater Karnataka, Bhubaneswar, Nagpur, Raipur, Indore, and Aurangabad. KIMS is also strategizing to incorporate new technologies into their operations and expanding digital capabilities to improve patient care.

Financials of the company

The paid-up capital before the issue stands at Rs. 775,932,830. The consolidated financial information of the company is as under:

IPO Details 

Lead managers of this IPO are Kotak Mahindra Capital Company Limited, Axis Capital Limited, IIFL Securities Limited, Credit Suisse Securities (India) Private Limited, and KFin Technologies Private Limited. Some other important details are tabulated below:

The offer also includes shares worth Rs.20 crore set aside for the company’s employees, who can purchase these shares at a discount of up to Rs.40 per share on the issue price.

Purpose of the IPO

Listing benefits like enhancing visibility and brand name are assured. Apart from this, the proceeds received from the offer for sale are to be received by the selling shareholders. The proceeds of Rs 2,000 million receivable from free issue after deducting offer-related expenses are to be utilized for the following two purposes:

• Repayment/prepayment, in whole or part, of certain borrowings availed by our Company and by our Subsidiaries viz KHKPL, SIMSPL, and KHEPL;

• General corporate purposes.

Why should you invest in KIMS’ IPO?

The company believes that it has the upper hand in few aspects compared to its competitors in the market, which is true.  Having over 20 years of experience, they are one of the most prominent players in the healthcare market of Andhra Pradesh and Telangana. Their clinical excellence and affordable pricing drive their leadership.

KIMS strives to attract, train and retain high-quality doctors, consultants, and other medical staff. The company’s senior management consists of experienced individuals with a commitment to patient care and ethical standards. 

It holds a track record of strong operational and financial performance. Within 20 years, KIMS grew from a single hospital with 200 beds to 9 multi-specialty hospitals and over 3,000 beds.

Risk factors to be considered 

There are a few factors a potential investor must consider before investing in this IPO.

• The hospital is highly dependent on healthcare professionals that are employed on a consultancy basis. 

• The hospital also is dependent more on a few areas of specialization than others for its revenue generation.

• Two of Hyderabad's hospital branches contribute to around two-thirds of its revenue. This could prove to be a huge drawback if the company fails in its attempt to expand in other parts of the country.

• Though the pandemic benefitted the company’s financials, it did adversely affect its operations. The volume of in-patients and out-patients substantially declined. Patients were reluctant to visit the hospital. 

• Due to the severity of the situation, the company’s employee safety costs have also shot up.

The Bottom Line 

Although we have highlighted the good and bad points quite precisely, we recommend you analyze the company’s attributes before jumping into the IPO. While this article would have provided you an overall idea, your homework would begin from here. Read about the company, its management, its peers, SWOT, etc., and see if it fits your bill.

It’s always wise not to let biases influence your investment decisions. So, ensure that you make an objective analysis of the stock, and only then decide whether to invest or not.

So, what’s it going to be? A hit or a miss? Tell us.