India: Metropolis Healthcare makes strong market debut at 9% premium

Ameera Shah, MD and CEO, Metropolis Healthcare. The firm’s plan follows successful IPOs by Dr Lal PathLabs and Thyrocare Technologies./ Mint

Shares of Metropolis Healthcare made a strong stock market debut on Monday. The diagnostics chain listed on the stock exchanges at 960 ($13.86), up 9.1% from its issue price of 880 ($12.70) per share.

The 1,204-crore ($173.8 million) initial public offering (IPO), with a price band of 877-880, was subscribed 5.84 times during the share sale, from 3-5 April. It is an offer for sale and the company will not receive any funds raised from the issue.

Ahead of the issue, Centrum Broking Ltd had said that the issue was fairly priced. “At higher end of the price band of 880, the issue is priced at 40.2 times of its FY18 earnings and 37.3 times its nine months of FY19 earnings on an annualised basis, which appears fairly priced…Given the vast geographical presence, diversified and large tests menu catering to several ailments, along with the ability to capture future opportunities by way of presence in key growth areas, is likely to help Metropolis maintain its position and boost growth,” the brokerage firm said in a note on 2 April.

Metropolis also has better return ratio with return on net worth (RoNW) at 24.7% for FY18 versus 21.6% for Dr Lal Pathlabs and 20.4% for Thyrocare Technologies, the brokerage firm added.

Metropolis Healthcare Ltd (MHL) has presence across 19 states in India with leadership position in west and south India through its network of 83 clinical laboratories and 1,473 patient touch points. The company offers a range of clinical laboratory tests and profiles used for prediction, early detection, diagnostic screening and confirmation and/or monitoring of the disease. It also offers analytical and support services to clinical research organizations for their clinical research projects.

During the first nine months of FY19, the company derived 62.8% of their revenue from five cities. Over FY16-18, its total revenue witnessed a CAGR of 16.3% to 644 crore. EBITDA grew at a pace of 16.8% with stable margins at 26.8% in FY18. For nine months of FY19, the revenue, EBITDA and net profit stood at 559 crore, 143 crore and 89 crore, respectively. The company does not invest in equipment but leases it out, thus following an asset light model which does not attract any major capital expenditure other than the regular maintenance expenditure.

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