Broach Lifecare BSE SME IPO review (Avoid)

•    The company is engaged in healthcare segment with a boutique of multi-speciality hospitals in and around Bharuch-Gujarat.
•    It has just one-year performance as a corporate entity and the earlier period performance is as a proprietorship concern.
•    It reported mix bag of financial performance with degrowth in its top and bottom lines till FY23.
•    Based on FY24 earnings, the issue appears aggressively priced.
•    There is no harm in skipping this pricey bet. 

ABOUT COMPANY:
Broach Lifecare Hospital Ltd. (BLHL) operates its boutique Hospitals under the brand "Maple Hospitals" and provide dedicated round-the-clock services to patients with heart ailments consisting of non-invasive cardiology services such as, 2D Echocardiography, Electrocardiography, Tread Mill Test, Holter monitoring, Ambulatory Blood Pressure Measurement, Stress test, Dobutamine Stress Echocardiography. Subsequently, in the year June/July 2023 it ventured into interventional cardiac services such as, coronary angiography and stenting, percutaneous coronary intervention ("PCI") and primary PCI for acute myocardial infarction as a division. The company also provides Ballon mitral-valvuloplasty, permanent pacemaker implantation, cardiac resynchronization procedures, implantable cardioverter-defibrillator ("AICD") implantation and procedures for congenital ailments such as coarctation of aorta, stenting and posterior descending artery closure. 

It also offers a complete range of diagnostic and therapeutic options such as endovascular revascularization, deep vein thrombosis treatment and peripheral angioplasty. Its hospital in Bharuch is an ultra-luxury hospital with 25 beds for in-patient treatment and is also equipped with diagnostic devices for performing test such as, 2D Echocardiography, Electrocardiography, Tread Mill Test, Holter monitoring, Ambulatory Blood Pressure Measurement, Stress test, Dobutamine Stress Echocardiography & high end Coronary care with life-saving equipment such as Intra-aortic Ballon Pump Machine, Biphasic Defibrillator, Ventilators, BIPAP machines, Syringe Pump, Volumetric Infusion Pumps and Multipara Monitoring Machines. 

Its Satellite Hospital at Ankleshwar is a 15 bedded nursing home which act as a referral centre and offers non-surgical day-to-day treatment to patients. The Satellite Hospital is also self-sustaining as they are strategically located to fulfil demand for basic tertiary care. BLHL's hospitals are certified by the National Accreditation Board for Hospitals & Healthcare Providers ("NABH") as a primary-level small healthcare organization. Its Hospital is having Certification of Atomic Energy Regulatory Board for PACS System & Fire safety certificate from local regulation bodies for safety of patients. The Company is also a member of Globe Bio Care for the disposal of biomedical waste.

As on the date of this Prospectus, its hospitals are empaneled with 4 PSU insurance companies, 15 Private Insurance companies and 8 Third Party Administrator (TPA). Further, it has also applied for the empanelment of hospitals under the Government of India's Flagship scheme i.e.  Ayushman Bharat Yojana Popularly known as PM-JAY. (Pradhan Mantri Jan Arogya Yojana). As of March 31, 2024, it had around 19 employees on payroll, and also employs casual staff as and when needed.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 1608000 equity shares of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 4.02 cr. The issue opens for subscription on August 13, 2024, and will close on August 16, 2024. The minimum application to be made is for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.49% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.45 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 2.62 cr. for purchase of machineries, Rs. 0.75 cr. for development of medical tourism web portal, and Rs. 0.20 cr.  for general corporate purposes. 

The issue is solely lead managed by Fedex Securities Pvt. Ltd., and KFin Technologies Ltd. is the registrar to the issue. Aftertrade Broking Pvt. Ltd. (erstwhile known as RCSPL Share Broking Pvt. Ltd.) is the market maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares at a price of Rs. 45 between August 2023 and September 2023. It also issued bonus shares in the ratio of 4 for 5 in September 2023. The average cost of acquisition of shares by the promoters is Rs. 5.56, Rs. 5.71, and Rs. 11.64 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 4.46 cr. will stand enhanced to Rs. 6.07 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 15.18 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last fiscal, the company has as a corporate entity, posted a total income/net profit of Rs. 2.61 cr. / Rs. 0.70 cr. (FY24). 

As a proprietorship concern, it posted a total income/net profit of Rs. 3.80 cr. / Rs. 0.77 cr. (FY21), Rs. 3.48 cr. / Rs. 0.46 cr. (FY22), Rs. 1.93 cr. / Rs. 0.14 cr. (FY23), and for Q1 of FY24 ended on June 30, 2023, it earned a net profit of Rs. 0.21 cr. on a total income of Rs. 0.69 cr. Thus its financial performance has mixed trends with declining top and bottom lines as a proprietorship concern.

For the last three fiscals, it has reported an average EPS of Rs. 1.92, and an average RoNW of 15.10%. The issue is priced at a P/BV of 2.04 based on its NAV of Rs. 12.26 as of March 31, 2024, and at a P/BV of 1.60 based on its post-IPO NAV of Rs. 15.63 per share. 

If we attribute FY24 super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 21.74. 

For the reported periods, the company has posted PAT margins of 26.77% (FY24), and RoCE margins of 17.09% respectively for the referred periods, as a corporate entity. 

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

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Family Care Hospitals, KMC Speciality Hospitals, and Global Longlife Hospital, as their listed peers. They are trading at a P/E of 3.24, 44.7 and NA (as of August 09, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER'S TRACK RECORD:
This is the 31st mandate from Fedex Securities in the last four fiscals (including the ongoing one), out of the last 11 listings, all listed with premiums ranging from 1.43% to 140.82% on the date of listing.