IPO Note | Healthcare

December 5, 2017

Shalby Limited

sue Open: December 05, 2017

IPO note

Issue Close: December 07, 2017

Shalby Limited is Ahmadebad based leading multi-specialty hospital chain

offering healthcare services in orthopaedics, complex joint replacements,

Issue Details

cardiology, neurology, etc. Currently it has total 11 hospitals. The company

operates an asset light model and generates most revenue from Gujarat.

Face Value: `10

Rich footprint Orthopaedic segment, strong promoter background: Shalby

Present Eq. Paid up Capital: `88.7cr

Hospitals has developed rich expertise in the orthopaedic surgeries with its total

capacity of 2,012 beds and 841 operating beds. It reported a total 15% market

Offer for Sale: *10lakh shares (*`24.5cr -

**`24.8cr)

share of all joint replacement surgeries conducted by private corporate hospitals

in India in 2016. It’s promoter Dr. Vikram Sharma is an orthopaedic surgeon with

Fresh issue: `480cr

more than 25 years of professional experience.

Post Eq. Paid up Capital: `108.01cr

Expanding its presence outside Gujarat, 3.0x growth in bed capacity: While

Issue size (amount): *`504.5cr -**`504.8cr

Shelby Hospitals derives most of its revenues from Gujarat, it is also gradually

expanding its presence outside the Gujarat. It has opened hospitals in Jabalpur,

Price Band: `245-248

Mohali, Indore and Jaipur and has indicated its plan to open its hospital in

Lot Size: 60 shares and in multiple thereafter

Nashik. Company also has healthcare centers in Ethiopia, Kenya, Tanzania, and

Post-issue implied mkt. cap:

*`2,652cr

Uganda in Africa, and two SACE in Ras al-Khaimah and Dubai. Owing to its

**`2,679cr

expansion of hospitals company has seen ~3.0x growth in its total beds from 674

Promoter and promoter group holding Pre-

in FY13 to 2012 in FY17.

Issue: 79.9%

Strong financial profile, healthy return profile: Owing to its leadership in the joint

Employee reservation: 1.21 lakh shares (`3cr)

replacement and asset light model, company has witnessed 9.6% growth in

revenue (FY13-FY17). With the strong focus on the cost control, its PAT has grown

Promoter and promoter group holding Post-

Issue: 79.4%

at a CAGR of 42.3% between FY13-FY17. Average EBITDA margins during this

period have been more than 20% indicating superior profitability than peers.

*Calculated on lower price band

** Calculated on upper price band

Operating ratios such as average length of stay (~4 days), Average revenue per

operating bed (~`33,000) have been consistent while due to the commencement

Book Building

of 9 new hospitals between FY12-FY18, its occupancy rate has declined from 49%

in FY13 to 34% in FY17. In FY17, company reported ROE of 23.5% and has been

QIBs

50% of issue

consistently improving. We believe that there is strong room for improvement

with 6 hospitals maturing over next two years

Non-Institutional

15% of issue

Outlook and valuation: At the upper end of the price band (`245-`248), the issue

Retail

35% of issue

is priced at 42.8x of its FY2017 earnings vs. Apollo hospitals (73.7x) and

Healthcare Global (121.2x). On EV per bed, it is available on 3.8x vs Apollo

(2.3x) and Healthcare Global at 2.1x. We like its growth story, better returns

**Post Issue Shareholding Pattern

profile than peers and strong growth prospects ahead.

Key Financials

Promoters Group

79.4

Y/E March (` cr)

FY2014

FY2015

FY2016

FY2017

Net Sales

259

275

290

325

DIIs/FIIs/Public & Others

20.6

% chg

6.4

5.4

12.0

Net Profit

% chg

-34.1

46.0

66.5

OPM (%)

24.2

24.5

19.1

22.2

EPS (Rs)

3.6

2.4

3.5

5.8

P/E (x)

68.6

104.1

71.3

42.8

P/BV (x)

15.6

13.1

10.7

8.3

Shrikant Akolkar

Adj. RoE (%)

27.7

15.3

18.3

23.5

RoCE (%)

30.1

18.5

10.6

9.6

+91 22 39357800 Ext: 6846

EV/Sales (x)

10.4

9.9

9.1

[email protected]

EV/EBITDA (x)

43.1

40.4

51.8

41.1

Source: Company, Angel Research

Please refer to important disclosures at the end of this report