Maitreya Medi NSE SME IPO review (May apply)

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• MML is a 125 bed multi-speciality healthcare service provider.
• It marked declining trends in its top line from FY21 to FY23.
• The sudden boost in bottom line for FY23 despite lower top line surprises one and all.
• Based on its super FY24 annualized earnings, the issue appears fully priced.
• Well-informed investors may park funds for medium to long-term rewards.

PREFACE:

MML is a Surat based multi speciality hospital. Surprisingly, its offer document has financial data in Rupees Thousands, which appears to be an eyewash. Its high time for regulators to have common reporting system either in Rs. Lakhs or in Rs. Millions. The IPO price band ad also has mismatch on Market Maker reservation and post-IPO NAV based on the lower and upper cap.

ABOUT COMPANY:

Maitreya Medicare Ltd. (MML) is a 125 bedded, Multi Superspeciality hospital incorporated in the year 2019 based out in Surat, Gujarat. It provides multi-disciplinary integrated healthcare services, with a focus on primary secondary & tertiary care. MML offers a comprehensive range of healthcare services across over 18 specialities and super specialities, including Cardiology, Urology, Oncology, Laparoscopic Surgery, Neurology, Neurosurgery, Spine Surgery, Nephrology including Dialysis, Gastroenterology, Gastrointestinal surgery, Cardiothoracic Surgery, Oncosurgery, Orthopedic Surgery including joint replacements and Arthroscopic surgeries, Gynecology & High-Risk Obstetrics, Hepatocellular Billary Surgery, Critical Care Medicine etc.

The company has grown from 67 bed capacity in 2021, to 100 beds capacity in 2022 and now 125 bed capacity in 2023. It is strategically focuses on the southern Gujarat healthcare market where the company has a strong understanding of regional nuances, customer culture and the mind set of medical professionals and where there is a growing need for quality and affordable healthcare services. The hospital also has integrated diagnostic services and pharmacies that cater to patients.

It follows a ‘patient first’ ideology by creating the good infrastructure with thrust on service delivery to all stake holders, be it patient, staff or doctors, technology and support to put patient-first and foremost and be futuristic and innovative in the delivery of healthcare services. As of the filing of the offer document, it had 375 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:

The company is coming out with its maiden book building route IPO of 1816000 equity shares of Rs. 10 each. It has announced a price band of Rs. 78 – Rs. 82 per share and mulls mobilizing Rs. 14.89 cr. at the upper cap. The issue opens for subscription on October 27, 2023, and will close on November 01, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.80% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 7.50 cr. for investment in the subsidiary – Maitreya Hospital, Rs. 1.00 cr. for redemption of preference shares, Rs. 5.00 cr. for working capital and the balance for general corporate purposes.

After reserving market maker portion, the company has allocated from the rest not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors.

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar of the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for the company.

Having issued initial equity shares at par, the company also issued bonus shares in the ratio of 495 for 1 in March 2023. The average cost of acquisition of shares y the promoters is Rs. 0.02, and Rs. 2.40 per share.

Post-IPO, MML’s current paid-up capital of Rs. 4.96 cr. will stand enhanced to Rs. 6.78 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 55.56 cr.

FINANCIAL PERFORMANCE:

On the financial performance front, for the last three fiscals, MML has posted total income/net profit of Rs. 57.04 cr. / Rs. 4.24 cr. (FY21), Rs. 49.74 cr. / Rs. 1.14 cr. (FY22), and Rs. 39.95 cr. / Rs. 4.23 cr. (FY23). For the H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 2.54 cr. on a total income of Rs. 24.85 cr.

For the last three fiscals, MML has reported an average EPS of Rs. 5.88 and an average RoNW of 45.99%. The issue is priced at a P/BV of 3.64 based on its NAV of Rs. 22.55 as of September 30, 2023. IPO ad is missing data on post-IPO NAV based on its price band.

If we attribute annualized FY24 earnings to the post-IPO paid-up capital of the company, then the asking price is at a P/E of 10.92. Thus the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 7.50% (FY21), 2.30% (FY22), 10.73% (FY23), and 10.25% (H1-FY24), and RoCE of 47.91%, 17.22%, 42.71% and 23.75% respectively for the reported periods.

DIVIDEND POLICY:

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:

As per the offer document, the company has shown Shalby Ltd., KMC Speciality Hospital, Global Health as their listed peers. They are trading at a P/E of 30.39, 46.69, and 69.07 (as of October 25, 2023). However, they are not comparable on an apple-to-apple basis. This compare is nothing but an eyewash.

MERCHANT BANKER’S TRACK RECORD:

This is the 17th mandate from GYR Capital in the last three fiscals. Out of the last 10 listings, all opened at a premiums ranging from 3.79% to 179.38% on the day of listing.

Conclusion / Investment Strategy

The company is operating 125 bed hospitals with multi-speciality healthcare services. It posted declining trends in its top lines, but surprisingly reported improved bottom lines from FY23 onward i.e. in a pre-IPO period. The issue appears fully priced based on its recent financial performance which discounts all near term positives. The small post-IPO equity capital indicates longer gestation for migration to mainboard. Well-informed investors may park funds for medium to long-term rewards.

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