KIMS Archives

Here are some of the major updates that could move the markets on Monday:

India’s GDP likely to grow 7% in FY23: NSO

The Indian economy is seen growing at a rate of 7% in the current financial year (FY23), as per the first advanced estimates of the National Statistical Office (NSO). The expected growth rate is lower than the 8.7% estimate for FY22. The advanced GDP estimates are an important figure for the government as they use it as a base to work out its economic growth and fiscal projections for the next Union Budget (Feb 1).

Read more here.

Sobha’s sales bookings rise 36% YoY to ₹1,425 crore in Q3

Sobha Ltd reported a 36% YoY growth in sales bookings to ₹1,424.7 crore for the quarter ended December 2022 (Q3 FY23) on a strong revival in demand. The company achieved its highest-ever quarterly sales volume of 1.47 million square feet, recording an increase of 11.6% YoY. The average price realisation improved to ₹9,650 per square feet in Q3, up 21.9% YoY.

Read more here.

Bharti Airtel launches 5G services in Hissar, Rohtak

Bharti Airtel has launched its 5G services in Hissar and Rohtak, expanding the reach of the new-age high-speed network in Haryana. The company’s 5G services are already live in Gurugram and Panipat. Airtel ‘5G Plus’ services will be available to customers in a phased manner as the company continues to construct its network and complete the rollout.

Read more here.

Macrotech Developers records ₹9,000 crore pre-sales in 9 months

Macrotech Developers (Lodha) has reported a 16% YoY growth in pre-sales for the quarter ended December (Q3 FY23) at ₹3,035 crore, taking its first nine months’ cumulative performance to a record level of 9,039 crore. The company’s net debt in India was reduced further by over ₹750 crore to ₹8,042 crores during Q3. Lodha has added four new projects across Mumbai and Pune with a gross development value potential of ₹8,500 crore.

Read more here.

Oil companies making ₹10 a litre profit on petrol, ₹6.5 loss on diesel: Report

Oil companies are selling petrol at a profit of ₹10 per litre and a loss of ₹6.5 a litre on diesel, according to an ICICI Research report. But for the past 15 months, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) have not revised petrol and diesel prices in line with the cost. They have times of low oil prices to recoup losses incurred when rates were high.

Read more here.

Unitech, former directors booked by CBI in fresh bank fraud case of ₹395 crore

The Central Bureau of Investigation (CBI) has filed a new case against Unitech Ltd and its former directors in connection with an alleged fraud in IDBI Bank involving an amount of ₹395 crore. The company was allegedly enjoying a vendor bill discounting facility (a kind of credit) of ₹400 crore from the IDBI bank in 2012. The accused Unitech founders are facing another CBI probe pertaining to alleged fraud in Canara Bank.

Read more here.

Sale of health insurance policies rising in rural areas: Report

The rising cost of healthcare services, demand from the micro-insurance segment, and post-Covid awareness are pushing the sale of health insurance policies in semi-urban and rural markets, according to a Times of India report. For instance, Kotak Mahindra General Insurance has more than doubled its rural policies from 13% in FY20 to 32% through September of the current financial year (FY23).

Read more here.

Alembic Pharma gets USFDA approval for overactive bladder treatment drug

Alembic Pharmaceuticals has received final approval from the US Food & Drug Administration (USFDA) for Fesoterodine Fumarate Extended-Release (ER) tablets. The drug is used to treat overactive bladder (OAB) in adults with symptoms of urinary incontinence, urgency, and frequency. According to IQVIA data, Fesoterodine Fumarate ER Tablets have an estimated market size of $177 million for the 12 months ended Sept 2022.

Read more here.

Kolkata-based JG Chemicals files papers for IPO

Kolkata-based JG Chemicals has filed a Draft Red Herring Prospectus (DRHP) with markets regulator SEBI to raise funds through an initial public offering (IPO). The IPO comprises a fresh issue of equity shares worth up to ₹202.50 crore and an offer-for-sale (OFS) of 57 lakh equity shares by its existing promoter group shareholders. JG Chemicals is India’s largest zinc oxide manufacturer in terms of production and revenue.

Read more here.

KIMS buys additional 5.53% stake in Sarvejana Healthcare

Hospital chain Krishna Institute of Medical Sciences Ltd (KIMS) has acquired an additional 5.53% stake in Sarvejana Healthcare Pvt Ltd. The shares were acquired at ₹340 per equity share. With this acquisition, KIMS holds 56.61% of the total paid-up equity share capital of Sarvejana Healthcare Private Ltd.

Read more here.

Krishna Institute of Medical Sciences or KIMS’ IPO has gone live on June 16, 2021. A private healthcare services company with a stronghold in Andhra Pradesh and Telangana, the company is likely to give fair competition to other listed stocks like FORTIS and Apollo Hospitals. Let’s talk about what the IPO has to offer.

The Business Model

Broadly speaking, any hospital has two sources of revenue, an In-Patient Department(IPD) and an Out-Patient Department(OPD). A minor health checkup, a follow-up checkup after surgery, or a regular visit to a physician counts as an OPD. Anything major involving critical care or a stay at the hospital is handled by IPD.

For the Indian Healthcare Industry, ~70% of the revenue comes from Inpatients which includes surgeries, critical care, general care, and other care. An interesting pattern was observed over the IPD and OPD figures. It seems that KIMS makes most of its money only through IPD. The volumes for inpatients is relatively low but has pretty high revenue. The opposite is true for OPD, where the volumes are relatively high but revenue doesn’t seem significant for the volume. This could talk a lot about the way the healthcare system in general churns money.

.	2018	2019	2020	9M 2021
Inpatient Volume	88,577	111,382	140,676	83,860
InpatientRevenue	Rs 594.7 Cr	Rs 717.6 Cr	Rs 879.9 Cr	Rs 778.3 Cr
Outpatient Volume	661,000	900,043	1,137,560	557,071
Outpatient Revenue	Rs 152.7 Cr	Rs 195.6 Cr	Rs 238.8 Cr	Rs 192.1 Cr

All Figures in Rs Crore

KIMS offers 25 types of speciality and super speciality services at its various hospitals. As of December 31, 2020, the total bed capacity of the hospital stood at 3064 beds across 9 locations viz. Secunderabad, Nellore, Rajahmundry, Srikakulam, Kondapur, Ongole, Vizag, Anantapur, Kurnool. Close to 50% of the group revenue comes from the KIMS Secunderabad facility.

.	2018	2019	2020	9M 2021
Bed Capacity	2,120	2,804	3,004	3,064
% Occupancy	75.83%	71.83%	80.49%	72.00%

The major revenue-generating specialities for KIMS are Cardiac Sciences(20.98% of Group Revenue) and Neuro Sciences(14.67% of Group Revenue).

KIMS’ healthcare services are classified as ‘affordable’ to an extent. The company Average Revenue Per Patient(ARPP) was Rs 79,000 per person which is 41% less compared to the Industry Average of 1,12,000 per person. KIMS manages affordability by optimizing bed usage, cost management and variable compensation to doctors based on patients attended, work hours, the severity of case etc.

The company prospectus states that it is working towards expanding in markets like Bangalore, Bhubaneshwar, Chennai and some cities in central India like Indore, Aurangabad, Nagpur and Raipur.

There are three factors that can add to the company’s performance: 1) Patient Volumes 2) Occupancy Rate of Beds 3) Cost Management Per Bed Occupied.

Finances

.	2018	2019	2020	9M 2021
Revenue	7,000.4	9,238.67	11,287.28	9,773.77
Profit	(461.90)	(485.86)	1,150.72	1,468.58
Debt	7,032.12	2,880.97	3,207.79	2,146.30

All Figures in Rs Crore

From the table given above, we can concur that the revenue has grown significantly over the past three years. In fact, KIMS has managed to surpass past annual figures in just 9 Months of FY 2020-21. The company drove up from a loss in 2018 and surpassed FY 2019-20’s profit figures in just 9 months of FY 2020-21. Moreover, the company now holds less than one-third of the debt it owed in 2018.

.	2018	2019	2020	9M 2021
Average Revenue Per Occupied Bed	18,807	18,334	18,307	21,823
Average Length Of Stay(Days)	4.49	4.47	4.34	5.30

All Amount In Rupees

The Average Revenue Per Occupied Bed(ARPOB) decreased between 2018-2020 till we saw a sudden spike in 2021, obviously due to the onset of COVID-19. The Average Length Of Stay(ALOS) too spiked in 2021. This increased the overall revenue and profits in 9M 2021.

The company offers the best Return On Capital Employed as compared to its peers. KIMS offers a ROCE of 22% followed by Narayana Health at 16%, Apollo Hospitals at 12% followed by the rest. The company also offers the highest turnover ratio(1.4) in the industry along with Apollo Hospitals. This means that the company is able to generate revenue efficiently from the assets it owns.

IPO Details

IPO Opening Date	Jun 16, 2021
IPO Closing Date	Jun 18, 2021
Issue Type	Book Built Issue IPO
Face Value	Rs 10 per equity share
IPO Price	Rs 815 to Rs 825 per equity share
Min Order Quantity	18 Shares
Issue Size	Rs 2,143.74 crore
Fresh Issue	2,424,242 equity shares of Rs 10
Offer for Sale	23,560,538 equity shares of Rs 10 (aggregating up to Rs 1,943.74 crore)

The Bottom Line

The past year has been economically beneficial for the healthcare and pharma industry. It is evident from KIMS’ finances that the company has progressed in the time of the pandemic. The company needs to focus on diversifying its geography. While two-thirds of KIMS’ revenue comes from its Secunderabad and Kondapur facilities, other competitors like Apollo, Fortis and others are rather widespread.

KIMS has an interesting model where doctors own a stake in many of their hospitals. Around 21% of its revenue comes from the top 10 doctors of the company. Although the company has managed to attract the best talent from the country, its revenue depends on very few doctors, any instance where the doctor decides to not work for KIMS could have an adverse effect on the revenue.

Bed occupancy rates took a hit during COVID-19, however, things are returning to normal for hospitals. If the vaccination drive is successful and we do not see an adverse third-wave of COVID-19, we can expect the company to scale up and reach heights like never before.