The Rs 869.08-crore initial public offering (IPO) of Jupiter Life Line Hospitals opened for subscription on Wednesday (September 6). The company will be selling its shares in the range of Rs 695-735, where investors can bid for a minimum of 20 equity shares and in multiples thereafter. The issue is open for public bidding till September 8.

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Last heard, shares of the multi-speciality healthcare provider were commanding a premium of Rs 218 in the grey market, according to market observers. The GMP for Jupiter Life Line Hospitals stayed healthy in the Rs 200-218 range in the past couple of days.

The grey market is an unofficial market wherein the IPO shares can be bought and sold till the listing.

What should investors do?

Most analysts have assigned a 'Subscribe' tag to the IPO as the company is well-positioned with good growth prospects. The issue also seems to be fairly valued across various valuation parameters when compared with its peers.

Swastika Investmart: Subscribe for long-term

Anubhuti Mishra, Equity Research Analyst at Swastika Investmart, has recommended investors to 'Subscribe' to the IPO for the long term. "We believe that Jupiter Life Line Hospitals is a well-positioned company with good growth prospects. The P/E (price-earnings) valuation of the IPO is around 52.68 times, which is in line with the industry’s average," Mishra said.

However, Mishra said that there are some risks to consider, such as the high level of competition in the healthcare industry, the company's regional concentration, and its relatively high expenses. "Additionally, the occupancy rate of its hospitals is lower than that of its listed peers. However, the company is working to improve this metric," the analyst said.

SBI Securities: Subscribe for long-term

"The IPO looks fairly valued across various valuation parameters when compared with its peers. With decent return ratios and margins, the risk-reward ratio for long-term investors looks favourable, it said while advising investors to subscribe to the IPO for a long-term investment perspective," the brokerage said.

Ventura Securities: Subscribe

"At the IPO price of Rs 735 (upper price band), JLHL is valued at P/E of 59.9 times. Considering the growth opportunities in the company and strong fundamentals, we recommend a Subscribe rating," it said.

JLHL mops up Rs 260.72 cr via anchor book

Ahead of the IPO opening, the company has raised Rs 260.72 crore from as many as 39 anchor investors. This includes marquee names like the Government of Singapore, Abu Dhabi Investment Authority, Fidelity Funds, Goldman Sachs, Nomura Funds, HSBC Global, Florida Retirement System, and Natixis International Funds.

Domestic investors including SBI Mutual Fund, ICICI Prudential, Nippon Life, HDFC Mutual Fund, Axis Mutual Fund, Aditya Birla Sun Life Trustee, UTI Mutual Fund, Motilal Oswal MF, HDFC Life Insurance, and SBI Life Insurance Company also participated in the anchor book.

About the offer

The IPO comprises a fresh issue of equity shares worth Rs 542 crore and an offer for sale (OFS) of 44.5 lakh equity shares by promoter group entities and other shareholders.

Under the OFS, Devang Vasantlal Gandhi will offload up to 12.5 lakh equity shares, and Devang Gandhi jointly with Neeta Gandhi will sell 9 lakh equity shares. Other selling shareholders include Nitin Thakker, Anuradha Ramesh Modi, Bhaskar P Shah, Rajeshwari Capital Market, Vadapatra Sayee Raghavan, and Sangeeta Ravat jointly with Hasmukh Ravat.

About 50 percent of the issue has been set aside for qualified institutional buyers, 15 percent for non-institutional investors and the rest 35 percent for retail investors.

The company aims to be debt free post the IPO. Proceeds raised by the company will be used for repaying debts amounting to Rs 510.4 crore, and the remaining for general corporate purposes.

Key concerns

1) Their revenues are significantly dependent on their Thane Hospital. Further, all their hospitals are located in the western regions of India which exposes them to risks related to regional concentration.

2) They incur high expenses in relation to manpower, infrastructure and medical equipment maintenance and repair costs, ancillary items, and pharmaceuticals.

3) Pricing regulations and related government reforms in the healthcare industry and associated uncertainty may adversely affect the business.

4) The healthcare industry is highly regulated and competitive.

5) The company’s bed occupancy rate is lower than a majority of its listed peers.

6) The company incurred losses in FY21. Their subsidiaries have also incurred losses and have had negative cash flows from operating activities in the past.

ICICI Securities, Nuvama Wealth Management and JM Financial are the book-running lead managers while KFin Technologies is the registrar of the issue. The equity shares are proposed to be listed on both BSE and NSE.

Jupiter Life Line Hospitals Limited is among the key multi-speciality tertiary and quaternary healthcare providers in the Mumbai Metropolitan Area (MMR) and western region of India and currently operates three hospitals under the “Jupiter” brand in Thane, Pune, and Indore, with a total bed capacity of 1,194 hospital beds and 1,306 doctors including specialists, physicians, and surgeons as of March 31, 2023.

First Published:Sept 6, 2023 12:01 PM IST