Medi Assist Healthcare’s IPO, currently 40% subscribed, reflects market optimism but faces challenges. Analysts cite fair valuation, TPA market dominance, and financial consistency as strengths, urging caution due to client concentration and reliance on subsidiaries. The OFS structure, set to raise Rs 1,171.58 crore, puts all proceeds in selling shareholders’ hands. The company’s extensive healthcare network, with 18,754 hospitals globally, positions it strategically. Financials showcase growth, but a 34% dip in H1FY24 net profit raises eyebrows. With a ‘Subscribe’ stance from some and ‘Neutral’ from others, the IPO’s success hinges on navigating these intricacies.
Medi Assist Healthcare’s IPO has garnered substantial attention, witnessing over 40% subscription on day one. The Bengaluru-based company, a key player in the third-party administrator (TPA) sector, faces a dynamic market. Analysts weigh the positives—fair valuation and TPA dominance—against potential pitfalls like client concentration and dependence on subsidiaries. The offer-for-sale (OFS) approach, aiming to raise Rs 1,171.58 crore, adds a layer of complexity. With a diverse healthcare provider network and robust financials, the IPO’s success is under scrutiny.
Analysts are cautiously optimistic, assigning a ‘Subscribe’ rating to the IPO due to fair valuation, a strong position in the third-party administrator (TPA) market, and consistent financial performance. However, they highlight concerns about client concentration, reliance on subsidiaries, and the nature of the offer-for-sale (OFS).
Medi Assist Healthcare specializes in providing third-party administration services to insurance companies through its subsidiaries, namely, Medi Assist TPA, Medvantage TPA, and Raksha TPA. Acting as a bridge between insurers, healthcare service providers, and policyholders, TPAs handle various tasks such as policy administration, customer service, and network management.
The company boasts a widespread healthcare provider network across 18,754 hospitals in 1,069 cities and towns, spanning 31 states in India and 141 countries globally as of September 30, 2023.
In terms of the IPO, Medi Assist plans to raise Rs 1,171.58 crore through an offer-for-sale of 2.8 crore shares, with a price band set at Rs 397-418 per share. The subscription period concludes on January 17, and successful investors are expected to receive shares in their demat accounts by January 19, with listing on the stock exchanges slated for January 22.
Since this is an OFS, the proceeds will go entirely to selling shareholders, and the company will not receive any funds. Currently, promoters Vikram Jit Singh Chhatwal, Medimatter Health, and Bessemer India Capital Holdings II collectively hold a 67.55 percent share, with a total promoter shareholding of 77.14 percent.
The IPO garnered Rs 351.5 crore through its anchor book issue, attracting investments from notable names like Nomura Trust, Goldman Sachs, Ashoka Whiteoak, Pinebridge Global Funds, Troo Capital, HSBC, and various domestic investors.
In terms of financials, Medi Assist reported a robust consolidated net profit growth of 18.7 percent year-on-year at Rs 75.31 crore for the year ending March 2023. However, the net profit for the six months ending September FY24 witnessed a 34 percent decline due to one-time costs. The company derives a substantial portion of its revenue from a limited number of clients, with the five largest clients contributing a significant percentage for the financial years 2021, 2022, and 2023.
At the upper price band, Medi Assist is valued at a P/E ratio of 38.2x of its FY23 earnings, with a post-issue market cap of Rs 2,878.3 crore. Analysts from different firms offer varied recommendations, with some suggesting a ‘Subscribe’ for the long term, while others maintain a ‘Neutral’ stance, expressing concerns over client concentration and the premium valuation.
Medi Assist Healthcare’s IPO presents a nuanced picture. Despite a strong start with over 40% subscription, analysts emphasize the need for cautious evaluation. The TPA giant’s global healthcare network and consistent financial performance provide a solid foundation. However, concerns about client concentration and an OFS structure warrant careful consideration. Investors face a decision between subscribing for the long term or adopting a neutral stance. The IPO’s outcome hinges on navigating these intricacies in the ever-evolving landscape of healthcare
