Rainbow Children Medicare IPO – Is it good or bad for investment?
Rainbow Children Medicare IPO (Rainbow Children Medicare Limited IPO) Details
Hyderabad based Rainbow Children Medicare is coming up with an IPO now. This IPO would open for subscription on 27th April, 2022. Company operates a multi-specialty pediatric, obstetrics and gynecology hospital chain in India. Company has generated strong revenue growth in the last 3 years. Should you invest in Rainbow Children Medicare IPO? Is this a good or bad for investment?
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About Rainbow Children Medicare Limited
Company is leading multi-specialty pediatric and obstetrics and gynecology hospital chain in India. Company operates 14 hospitals and 3 clinics in 6 cities with a total bed capacity of 1,500 beds.
Company has highest hospital beds among comparable players in the maternity and pediatric healthcare delivery sector as of Mar-2021. Its core specialties are pediatrics, including newborn and pediatric intensive care, pediatric multispecialty services, pediatric quaternary care and obstetrics and gynecology.
Rainbow Children Medicare IPO – Issue Details
|IPO Opening Date||27-Apr-22|
|IPO Closing Date||29-Apr-22|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 516 to Rs 542 per equity share|
|Lot Size||27 Shares|
|Listing at||BSE and NSE|
|Total Issue Size||Rs. 1,595.59 Crores|
|Fresh issue||Rs. 280 Crores|
|OFS||Rs. 1,315.59 Crores|
Rainbow Children Medicare IPO RHP
What are the competitive strengths of Rainbow Children Medicare Limited IPO?
1) Company has the ability to conceptualize, create and operate specialized children’s hospitals.
2) Leading pediatric multi-specialty healthcare chain with strong clinical expertise in managing complex diseases.
3) Comprehensive perinatal care provider, with synergies between pediatrics and obstetrics and gynecology services.
4) Hub-and-spoke model that provides synergies and ensures better care and access for patients.
5) Proven ability to attract, train and retain high-caliber medical professionals.
6) Strong track record of growth, operational and financial performance.
What are the Objects of the IPO Offer?
Rainbow Children Medicare IPO Size is Rs 1,595 Crores and the proceeds would be utilized as follows:
1) Offer for Sale (OFS) for Rs 1,316 Crores – Under Offer for sale (OFS), these funds would go to selling shareholders and company would not get any proceeds from the issue.
2) Fresh issue of Rs 280 Crores: Company proposes to utilize the net proceeds from the fresh issue towards funding the following objects:
Early redemption of NCDs issued by the company in full.
Capital expenditure towards setting up of new hospitals and purchase of medical equipment for such new hospitals.
General corporate purposes.
Who are the promoters of Rainbow Children Medicare Limited IPO?
Dr. Ramesh Kancharla, Dr. Dinesh Kumar Chirla and Dr. Adarsh Kancharla are the promoters of the company.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years and 9 months.
|Financial Year ending / Period ending (Amt in Mns)|
|Particulars||FY19||FY20||FY21||9M ending Dec-21|
|Profit After Tax||445.9||553.4||395.7||1,264.1|
Why to invest in Rainbow Children Medicare IPO?
Here are the positive factors in this company.
1) Company is a leading pediatric multi-speciality healthcare chain with strong clinical expertise in managing complex diseases.
2) Company has the ability to conceptualize, create and operate specialized children’s hospitals.
3) Company has generated strong revenue growth in the last 3 years and 9 months. Its revenues were at Rs 551.1 Crores in FY19 Vs. 660.3 Crores in FY21. Its revenues for 9 months ended Dec-21 zoomed to Rs 774 Crores.
4) While company margins have dipped in FY21 compared to FY20/FY19 (due to covid pandemic), its margins zoomed to Rs 126.4 Crores for 9 months ended Dec-21.
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Risk Factors of investing in Rainbow Children Medicare IPO
1) Company is dependent on its medical professionals. Its business and financial results could be impacted if they are unable to attract and retain medical professional talent.
2) Company engages doctors primarily on a consulting service, contract basis and there is no assurance that its doctors will not prematurely terminate their agreements.
3) Company revenues are highly dependent on its hospitals in Hyderabad and Bengaluru. It also significantly dependent on certain specialities for a majority of its revenues. Any impact on the revenues from these hospitals or specialties could materially affect its business.
4) Portion of the net proceeds of the IPO offer is proposed to be used for early redemption of NCDs in full and would be paid to NCD investors, CDC Emerging Markets Limited which is one of the group companies.
5) A portion of the fresh issue of the IPO offer is being proposed to be utilized towards early redemption of Non-Convertible Debentures (NCDs) in full, will be paid to the NCD-holder and CDC Emerging Markets Limited, one of our Group Companies.
6) Refer RHP for complete risk factors in this IPO.
What is Rainbow Children Medicare IPO GMP today?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market.
Currently, its GMP is around Rs 68.
Rainbow Children Medicare Limited IPO Valuation
1) Rainbow Children Medicare IPO price band is Rs 516 to 542 per share.
2) If we consider last 3 years weighted average EPS of Rs 4.89 and the upper price band of Rs 542, P/E works out to be 110x.
3) Similarly, if we consider FY2021 EPS of Rs 4.25 and the upper price band of Rs 542, P/E works out to be 127x.
4) If we consider 9 months ending Dec-21 EPS and annualize it P/E works out to be 31x.
5) Means company is asking IPO price in the P/E ratio of 31x to 127x.
As per the RHP, there are listed peers like Apollo Hospitals trading at P/E 428x (Highest) and KIMS trading at P/E 54x (Lowest). Hence Rainbow Children IPO Price at Rs 542 is fully priced.
Rainbow Children Medicare IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||05-May-22|
|Initiation of Refunds||06-May-22|
|Credit to Demat Account||09-May-22|
|IPO Shares Listing Date||10-May-22|
How to buy Rainbow Children Medicare IPO online through Zerodha?
You can login to your demat account, visit the IPO section and apply for this IPO during the subscription dates.
You can also apply this IPO on Zerodha. If you do not have Zerodha account, sign-up here and proceed to the next step.
Zerodha customers can apply in this IPO by login into Zerodha Console submitting an IPO application form.
Follow below steps to apply this IPO in Zerodha platform:
1) Visit the Zerodha portal and login to Console.
2) Go to Portfolio and click the IPOs link.
3) Visit ‘Rainbow Children Medicare Limited IPO’ row and click the ‘Bid’ button.
4) Enter your UPI ID, Qty and the Price which you want to bid.
5) Click on ‘Submit’ IPO application form.
6) Visit the UPI App (net banking or BHIM) to approve the mandate.
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Rainbow Children Medicare IPO Review – Should you invest or avoid?
You might be wondering whether Rainbow Children Medical IPO is good or bad for investment?
Rainbow Children Medicare operates a multi-specialty pediatric, obstetrics and gynecology hospital chain in India.
Company has generated strong revenue growth in the last 3 years and 9 months.
While its margins are fluctuating, they are significantly improved for 9 months ended Dec-2021.
Its IPO price is fully priced.
Considering all positive and risk factors, investors can invest in this IPO for medium to long term perspective.
Do you agree with our views?
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Exclusive Childrens’ Hospital may not be a viable proposition. Even Apollo Hospitals took a lot many years to break even. In Andhra Pradesh, TTD manages a world class Children’s Hospital. Why go elsewhere? Let us review its performance next year. One of your readers already commented about inflated Net Profit. No Hurry!
Suresh ji, I see two red flags in this.
1. Latest 9 months profit of 16% is more than double of trailing 3 years average. There is a possibility of exaggeration as 9 months accounts are unaudited and any year end provisions might not be accounted for.
2. Fully pricing of the issue above 100 PE and walking with large premium with large chunk of the proceeds by promoters gives alarm.
3. If the company is not able to keep 16% of the profits in the future, the share price will nosedive from the issue price.
Currently Apollo Hospitals is trading at high valuations. If we compare such peers its fully priced, however 100 P/E is high.
We cannot compare it with Apollo Hospital.
For KIMS, it is 54
Hence, the offer price is very high.
We cannot compare only the lower ones. In such case every IPO would be over priced. One need to compare the highest and lowest and industry average and then take a call.