Unihealth Consultancy NSE SME IPO review (Apply)

•    UCL has healthcare service centres in India and the African continent.
•    It has posted inconsistency in its bottom lines for the reported financial data.
•    Based on super performance for FY23, the issue appears fully priced. 
•    The company has bright prospects considering Indo-African business ties.
•    Investors may apply for short to long-term rewards.

ABOUT COMPANY:
Unihealth Consultancy Ltd. (UCL) is a healthcare service provider based out of Mumbai, India and has an operational presence in multiple countries across the African continent. Its business segments include Medical Centres, Hospitals, Consultancy Services, Distribution of Pharmaceutical and medical Consumable Products and Medical Value Travel. Under the flagship 'UMC Hospitals' brand, the company operates a combined capacity of 200 operational hospital beds across two multi-speciality facilities i.e. UMC Victoria Hospital in Kampala, Uganda, having a bed-strength of 120 beds and UMC Zhahir Hospital in Kano, Nigeria has a bed strength of 80 beds. 

In addition to these, UCL operates 'Unihealth Medical Centre' a dedicated dialysis facility, in Mwanza, Tanzania. The company is currently providing Project Management Consultancy Services to set up a 300+ bedded Health City in Undri, Pune (Maharashtra, India) for PHRC Lifespaces Organization along with a few other healthcare consultancy projects in Kenya and Angola.

It exports and distributes pharmaceutical and medical consumable products in Uganda, Tanzania and Nigeria. It is a distributor in different African countries for various pharmaceutical and consumable manufacturing companies based out of India. 

The company is also supported by a dedicated team of key management personnel. Unihealth Pharmaceuticals Private Limited, a subsidiary of UCL, is in the business of procuring and exporting pharmaceutical and medical consumable products. The Company exports and supplies these products mainly to Victoria Hospital Limited (Joint Venture of Unihealth Consultancy Limited) in Uganda, UMC Global Health Limited (Joint-Venture of Unihealth Consultancy Limited) in Nigeria and Biohealth Limited (Subsidiary of Unihealth Consultancy Limited) in Tanzania. The key products exported and distributed by the company are laboratory consumables, surgical sutures, dialysis consumables, general medical consumables and intensive care medicines. As of July 31, 2023, it had 510 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book-building route IPO of 4284000 equity shares of Rs. 10 each. It has announced a price band of Rs. 126 - Rs. 132 per share and mulls mobilizing Rs. 56.55 cr. at the upper cap. The issue opens for subscription on September 08, 2023, and will close on September 12, 2023. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.82% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 17.00 cr. for investment in its JV-VHL, Rs. 4.60 cr. for investment in its JV-UMCGHL, Rs. 15.88 cr. for investment in subsidiary - BL, and the rest for general corporate purposes. 

After reserving 216000 equity shares for the market maker, the company has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors. 

Unistone Capital Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. Rikhav Securities Ltd. is the market maker for the company. 

Having issued initial equity shares at par, the company issued/converted further equity shares in the price range of Rs. 800 - Rs. 1100 per share between November 2016 and March 2023. It has also issued bonus shares in the ratio of 7 for 1 in May 2023. The average cost of acquisition of shares by the promoters is Rs. 0.75, and Rs. 1.25 per share. 

Post-IPO, UCL's current paid-up equity capital of Rs. 11.12 cr. will stand enhanced to Rs. 15.40 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 203.28 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, UCL has (on a consolidated basis) posted a total income/net profit of Rs. 28.64 cr. / Rs. 4.95 cr. (FY21), Rs. 37.93 cr. / Rs. 3.79 cr. (FY22), and Rs. 46.03 cr. / Rs. 7.66 cr. (FY23). It marked growth in its top lines but the bottom line marked inconsistency for the reported periods. 

For the last three fiscals, UCL has reported an average EPS of Rs. 5.37 and an average RoNW of 30.36%. The issue is priced at a P/BV of xx based on its NAV of Rs. 24.76 as of March 31, 2023, and at a P/BV of xx based on its post-IPO NAV of Rs. 54.59 per share (at the upper cap).

If we attribute super earnings of FY23 to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 26.56. Thus the issue appears fully priced based on its current financial status. As it is operating in a unique way, it may explore more rewards for investors in the coming years. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. 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 KMC Speciality as their listed peer. It is currently trading at a P/E of 54.03 (as of September 06, 2023). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 13th mandate from Unistone Capital in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at a discount and the rest with premiums ranging from 10% to 270.40% on the date of listing.