New Delhi: Rainbow Children’s Medicare’s Rs 1,581 crore Initial Public Offering (IPO) opened for subscription on Wednesday 27 April with the company selling its shares in the range of Rs 516-542.
Based in Hyderabad, this company operates a chain of multi-specialty paediatrics, obstetrics and gynecology hospitals in India. In 1999 the company started operations.
Rainbow Children’s Medicare is issuing new shares worth Rs 280 crore while existing promoters and shareholders are issuing 24,000,900 shares for a total value of Rs 1,300.85 crore.
Shareholders participating in the OFS include promoters Ramesh Kancharla, Dinesh Kumar Chirla and Adarsh Kancharla and promoter group company Padma Kancharla and investors British International Investment and CDC India.
The net proceeds from the reissuance will be used to prepay non-convertible debt securities (NCDs) to be issued by the Company, along with capital expenditures to establish new hospitals and purchase equipment.
Investors can bid for at least 27 shares and then multiples of that. The issue can be subscribed to until April 29th.
Backed by a UK-based CDC group, Rainbow operated 14 hospitals and three clinics in six cities in India with a total bed capacity of 1,500 beds (as of December 20, 2021).
Rainbow offers a rebate of Rs 20 per share to eligible employees. 50 percent of the net offering is reserved for qualified institutional investors, while 15 percent is reserved for non-institutional bidders and the remaining 35 percent is reserved for retail investors.
Prior to its IPO, Rainbow Children’s Medicare allotted a total of 8,663,404 shares at Rs.542 to anchor investors, bringing the transaction size to Rs.469.55 billion, according to a circular uploaded to the BSE website.
Investors participating in the anchor round included the Government of Singapore, Monetary Authority of Singapore, Amansa Holdings, Goldman Sachs Pte, IIFL Special Opportunities Fund, Bajaj Allianz Life Insurance, Max Life Insurance and various domestic mutual funds.
Kotak Mahindra Capital Company, JP Morgan India and IIFL Securities are the accountants of the offering. KFin Technologies has been appointed as registrar for the offering.
Let’s take a look at what brokers have to say and recommend about Rainbow Children’s Medicare’s IPO:
ICICI Direct
Rating: Subscribe
Rainbow Children’s Medicare has a focused, child-centered approach, and the target market is expected to grow at a 14% CAGR through FY26, the broker said, adding that key for Rainbow is maintaining its current growth trajectory amid a increasing healthcare consolidation and margin profile. Due to its unique model and decent rating, it has given a Subscribe rating.
Nirmal Bang Institutional Stocks
Rating: Subscribe long-term
Specialty chains like Rainbows are likely to gain more market share in the specialty as people tend to be more inclined towards general service aspects, especially when a child is born, which is a form of celebration. It was suggested to “Subscribe for the long term”.
angel one
Rating: Neutral
Based on the latest numbers, the IPO is priced in line with listed peer groups. The company’s revenue and profitability metrics have improved significantly, but this momentum is not expected to continue. Brokerage found its valuations aggressive and remained neutral on the issue.
selection mediation
Rating: Subscribe with caution
Rainbow Children’s Medicare, with its pediatric-focused operations and clinical expertise in treating complex diseases, is well positioned to benefit from market growth, the broker said.
In the higher price range, the company is asking for a P/E multiple that’s slightly higher than peer averages, it added, while giving the issue a “subscribe with caution” rating.
Reliance Securities
Rating: Subscribe
It has the strong clinical expertise to treat complex diseases and its hub-and-spoke model offers synergy and ensures better care and access for patients, Reliance Securities said.
“Given the specialized portfolio, hospital expansion, improvement in financial position, likely margin improvement and valuation comfort compared to peers, we recommend the issue with a ‘Subscribe’ rating,” the broker said.
Marwadi Financial Services
Rating: Subscribe
Considering the December 2021 TTM, the company will trade at P/E of 43.16x and a market capitalization of Rs.5,501.3 crore, while its peers namely Apollo Hospital Enterprise and Fortis Healthcare are trading at P/E of 77.3x and 56 “9x traded,” said the agent.
“We are rating this IPO as Subscribe because the company is a leading multi-discipline pediatric healthcare chain with strong clinical expertise in treating complex diseases,” the brokerage firm said.
Swastika Investmart
Rating: Subscribe long-term
The company follows a financially disciplined model focused on cost-effective growth. In the future, they may seek to expand their hospital network by acquiring brownfield assets or developing greenfield assets, the broker said.
“The specialization of the business-savvy management team, proven ability to attract, train and retain high caliber medical professionals while penetrating hospitals in India make this theme a good choice,” it added.
Hem Securities
Rating: Subscribe
Rainbow Children’s Medicare, a leading pediatric multidisciplinary healthcare chain with strong clinical expertise in treating complex diseases, follows a hub-and-spoke model that offers synergies, the company said with a Subscribe rating.
“It has a strong track record of growth, operational and financial performance and an experienced senior management team with strong institutional shareholders, but cares about the company’s current workload and future business plans,” it added.
(Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of Economic Times)
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