Krishna Institute of Medical Sciences (KIMS Hospitals) Rs 2,144-crore initial public offer (IPO) opens for subscription today. The public offering of the healthcare service provider will be open for three days, from June 16 to 18, and the shares will be sold in a price range of Rs 815-825 per share.

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The IPO comprises a fresh issue of Rs 200 crore and an offer for sale (OFS) of up to 2.35 crore equity shares by promoters and existing shareholders. The total issue size comes to Rs 2,143.7 crore. It has already garnered Rs 955.68 crore from anchor investors, at a higher end of the price band, on June 15.

Post issue, promoter shareholding in the company will drop to 38.8 percent from the current 46.8 percent and the public shareholding will increase from 53.2 percent to 61.2 percent.

READ MORE: KIMS IPO to open on June 16: Things to know before subscribing to the issue

The company will use the IPO proceeds to repay debts of around Rs 150 crore availed by the company and its subsidiaries and for general corporate purposes.

Most brokerages recommend subscribing to the issue on the back of KIMS’ regional dominance in Andhra Pradesh and Telangana, potential growth prospects, strong balance sheet, diversified revenue, and strong financials.

Here's what brokerages have to say about the issue:

Geojit Financial Servcies

At the upper price band of Rs 825, KIMS is available at EV/EBITDA of 18.6x (FY21) which appears fully priced. We expect to see a recovery in patient footfalls and occupancy rates as lockdown restrictions ease. The company’s leadership position in Andhra Pradesh and Telangana along with expansion into new markets and increased bed capacity will be strong levers for future growth. We assign subscribe rating with a long-term perspective.

Angel Broking

The company has one of the best return on equity and return on capital employed ratios of 23.8 percent and 24.8 percent respectively. It has a very healthy balance sheet with negative net debt/equity. We believe that the upcoming expansion plan in Bangalore and Chennai can be funded through internal accruals and a minimum amount of debt. We recommend subscribing to the IPO as the company’s expansion plans can be funded through its cash reserves.

ICICI Direct

Along with the advantage of regional dominance, operational efficiency, KIMS has demonstrated one of the best financial performances among its peers. It also has an almost net debt-free balance sheet, healthy free cash flow in FY21 despite operating in an asset-heavy industry. KIMS' ability to turn around acquired assets also seems one of the best in the industry. Based on current performance, the brokerage assigned subscribing for listing gain. However, due to steep competition, expanding in others geographies may depress its financials, going ahead, it added.

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Ventura Securities

The brokerage highlighted the presence of the company in Tier I, II, and III markets across south India, affordable healthcare, comprehensive infrastructure, and strong brand equity. It believes there is a potential upside of 55 percent from the issue price of Rs 825 and values the stock at Rs 1,275. This represents a potential upside of 55 percent from the IPO price of Rs 825 per share (upper band) over the next 24 months. The brokerage recommends subscribing for long-term gains.

Choice Broking

The brokerage highlighted how sustaining margin at levels way above industry trends would remain a challenging task. Further, business is skewed towards a particular region which may restrict KIMS to leverage growth opportunities. It also has a subscribe rating for the issue.

Anand Rathi

Anand Rathi has also given this IPO a subscribe rating given the company's dominant position in Andhra Pradesh and Telangana, diversified revenue across specialties, growth prospects, strong balance sheet, and a high return on net worth (RoNW).

KIMS Hospitals consistently delivered strong operational and financial performance through strong patient volumes, cost efficiency, and diversified revenue streams across medical specialties. It has achieved healthy profitability in both Tier 1 and Tier 2-3 markets, according to the brokerage.