Aashka Hospitals BSE SME IPO review (May apply)

•    AHL is in the healthcare servicing segment with a 200-bed hospital.
•    The company posted good performance for FY21 despite the pandemic.
•    Gujarat is becoming the most preferred destination for health treatments.
•    Sustainability of recent performance raises concern.
•    This mega SME issue is aggressively priced compared to peers.

ABOUT COMPANY:
Aashka Hospitals Ltd. (AHL) is engaged in the health care servicing segment. The Company decided to step up its support in the fight against COVID-19 and was a designated COVID-19 treatment hospital. With the support of its doctors and staff, it has treated more than 2000 COVID-19 patients.

Aashka means 'Blessing' & Aashka Hospitals signifies blessing, a blessing of fine health. It is certified by National Accreditation Board for Hospitals and Healthcare Providers ('NABH Accredited') for tertiary and apical care level hospitals in Gujarat. It is an integrated healthcare service provider, committed to delivering quality healthcare services to patients in modern facilities that include prevention, best treatment and proper rehabilitation.

AHL serves with ultra-modern medicinal practices and state of the art infrastructure for medical as well as surgical care solutions. It aims towards continuous improvement of healthcare facilities and to achieve the level of care and quality.

AHL is a part of Ayushman Bharat, a flagship scheme of the Government of India which was launched and recommended by the National Health Policy 2017, to achieve the vision of universal health coverage (UHC). The initiative has been designed on the lines as to meet SDG & its underlining commitment. Ayushman Bharat is an attempt to move from a sectoral & segmented approach of health service delivery to a comprehensive need-based health care service and Mukhyamantri Amrutam (MA) scheme is launched by Gujarat state to cater for families below the poverty line

It has an aggregate bed capacity of 140 beds extendable up to 200 beds. As of April 30, 2021, the company has conducted an aggregate of over 4,900 surgeries and provided healthcare services to an aggregate of over 65000 patients, consisting of 18000 indoor patients and 47,000 OPD patients.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment/prepayment of certain borrowing in part/full (Rs. 20 cr.), funding for inorganic growth initiatives (Rs. 28.54 cr.) and general corpus fund needs (Rs. 15 cr.), AHL is coming out with a maiden IPO of 8400000 equity shares of Rs. 10 each with a fixed price of Rs. 121 per share to mobilize Rs. 101.64 cr. The issue comprises of fresh equity issue of 5400000 shares (Rs. 65.34 cr.) and an Offer for Sale (OFS) of 3000000 shares (Rs. 36.30 cr.). The issue opens for subscription on August 10, 2021, and will close on August 13, 2021. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 35.90 % of the post issue paid-up capital of the company. The company will spend Rs. 2.80 cr. for this IPO proceeds.

The issue is solely lead managed by Fedex Securities Ltd. while Accurate Securities & Registry Pvt. Ltd. is the registrar to the issue. Rikhav Securities Ltd. is the market maker for this issue.

Having issued initial equity at par, AHL converted further equity at Rs. 100 per share in May 2017.

Post issue, AHL's current paid-up equity capital of Rs. 18.00 cr. will stand enhanced to Rs. 23.40 cr. Based on the IPO price, the company is looking for a market cap of Rs. 283.14 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, AHL has posted turnover/net profits of Rs. 27.73 cr. / Rs. 1.36 cr. (FY19), Rs. 27.25 cr. / Rs. 1.38 cr. (FY20) and Rs. 40.69 cr. / Rs. 4.11 cr. (FY21).

For the last three fiscals, AHL has posted an average Eps of Rs. 1.54 and an average RoNW of 10.41%. The issue is priced at a P/BV of 7.45 based on its NAV of Rs. 16.25 per share as of March 31, 2021, and at a P/BV of 3 based on post issue NAV of Rs. 40.42 per share.

If we attribute FY21 super earnings on fully diluted post issue equity capital, then the asking price is at a P/E of around 68.75. Thus the issue is aggressively priced.

COMPARISON WITH LISTED PEERS:
As per offer documents, AHL has shown Narayana Hrudayalaya, KMC Speciality, Fortis Malar, Shalby Ltd., and Krishna Institute of Medical as its listed peers. They are currently trading at a P/E of around 00, 49.68, 00, 50.35 and 52.11 (as of August 06, 2021). However, they are not truly comparable on an apple to apple basis.

DIVIDEND POLICY:
The company has not declared any dividend since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects.

MERCHANT BANKER'S TRACK RECORD:
This is the 11th mandate from Fedex Securities Ltd. in the last four fiscals (including the ongoing one).  Out of the last 10 listings, 1 opened at discount, one at par and the rest with premiums ranging from 0.16% to 56.52% on the day of listings.