IPO Analysis: Rainbow Children’s Medicare Ltd

Vishwajeet Bhandigare
/ Categories: Trending, IPO Analysis
IPO Analysis: Rainbow Children’s Medicare Ltd

IPO Rating: Invest for long-term 

About the issue: 

Engaged in healthcare sector, the company primarily focuses on pediatric, obstetrics and gynecology fields. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises a fresh offer of shares worth Rs 280 crore and offer for sale by existing shareholders of Rs 1,300.85 crore, according to its red herring prospectus. The price band of the issue has been fixed at Rs 516 to Rs 542 per equity share. The IPO opening date is April 27, 2022, and it will be closing on April 29, 2022. The issue will be listed on the exchange on May 10, 2022. The IPO market lot size is 27 shares. A retail-individual investor can apply up to a maximum of 13 lots (351 shares or Rs 190,242).      

The objects of the offer are:        

  • The Early redemption of NCDs issued by company, in full. 

  • Capital expenditure towards setting up of new hospitals and purchase of medical equipment for such new hospitals. 

  • General corporate purposes. 

Rainbow Children Medicare IPO Details:

IPO Opening Date 

Apr 27, 2022 

IPO Closing Date 

Apr 29, 2022 

Issue Type 

Book Built Issue IPO 

Face Value 

₹10 per equity share 

IPO Price 

₹516 to ₹542 per equity share 

Market Lot 

27 Shares 

Min Order Quantity 

27 Shares 

Listing At 

BSE, NSE 

Issue Size 

[.] Eq Shares of ₹10 
(aggregating up to ₹1,580.85 Cr) 

Fresh Issue 

[.] Eq Shares of ₹10 
(aggregating up to ₹280.00 Cr) 

Offer for Sale 

24,000,900 Eq Shares of ₹10 
(aggregating up to ₹1,300.85 Cr) 

Employee Discount 

Rs 20 per share 

QIB Shares Offered 

50% of the net offer 

Retail Shares Offered 

35% of the net offer 

NII (HNI) Shares Offered 

15% of the net offer 

 

About the company: 

Rainbow Children's Medicare Limited operates a multi-speciality pediatric, obstetrics and gynaecology hospital chain in India. The company offers a wide range of services such as newborn and pediatric intensive care, pediatric multi-speciality services, pediatric quaternary care, obstetrics and gynaecology, which includes normal and complex obstetric care, and multidisciplinary fetal care, perinatal genetic and fertility care. Rainbow Children's Medicare operates 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds, as of September 30, 2021. In 1999, the company started its first pediatric speciality hospital in Hyderabad. 

Rainbow Children's Medicare Limited operates on a full-time doctor model ensuring that most of the core specialists are available 24/7 which is particularly important for children's emergency, neonatal and pediatric intensive care services. As of September 30, 2021, the company had 602 full-time doctors and 1,686 part-time/visiting doctors. 

Competitive Strengths: 

Ability to conceptualize, create and operate specialized children's hospitals. 

Leading pediatric multi-speciality healthcare chain with strong clinical expertise in managing complex diseases. 

Comprehensive perinatal care provider, with synergies between pediatric and obstetrics and gynaecology services. 

The hub-and-spoke model provides synergies and ensures better care and access for patients. 

Strong track record of growth, and operational and financial performance. 

Experienced senior management team with strong institutional shareholder support. 

Company Financials: 

The revenue has grown by 56.6 per cent from December 2020 to December 2021. For the same period, the net profit has almost quadrupled. Below is the financial summary: 

Summary of financial Information (Consolidated) 

Particulars 

For the year/period ended (Rs in Millions) 

 

31-Dec-21 

31-Dec-20 

31-Mar-21 

31-Mar-20 

31-Mar-19 

Total Assets 

12,397.56 

10,762.22 

10,812.67 

10,192.37 

9,263.96 

Total Revenue 

7,740.62 

4,942.93 

6,603.10 

7,297.37 

5,511.44 

Profit After Tax 

1,264.13 

385.25 

395.68 

553.40 

445.90 

 

Recommendation: 

There are no two ways the company’s strong market position in its core focused fields which are pediatrics, which includes newborn and pediatric intensive care, pediatric multispecialty services, and obstetrics and gynecology, which includes normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetic and fertility care. According to the CRISIL Report, we had the highest number of hospital beds amongst comparable players in the maternity and pediatric healthcare delivery sector, as of March 31, 2021.    

It follows a doctor engagement model whereby most of its core specialists work exclusively at its hospitals on a full-time retainer basis. This model ensures that most of core specialists are available 24/7 on a roster basis at hospitals, which is particularly important for children’s emergency, neonatal and pediatric intensive care services. As of December 31, 2021, it had 641 full-time doctors and 1,947 part time/visiting doctors. 

In recent years, it has expanded its hospital network and increased its bed capacity from 1,162 beds as of March 31, 2019 to 1,500 beds as of December 31, 2021. Over the same period, it increased the number of hospitals from 10 to 14. It plans to invest in specialized medical infrastructure such as cath labs, pediatric cardiac OT and echocardiogram machines, which will enhance its capabilities in treating cardiac patients. Currently the company has strong presence in South India, and it actively exploring opportunities to expand in north east India and in neighboring countries. From time to time, it would also consider inorganic growth opportunities. 

The company appears financially sound. The ROE and ROCE stood at 21.3 per cent and 22 per cent as of December end of 2021. It is also a dividend-paying company as it announced a 20% dividend in FY22. Hence, we recommend to invest in the IPO for the long term. 

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