Bangalore-based Cancer specialist HealthCare Global Enterprises (HCG) has received capital market regulator SEBI’s approval to bring its initial public offering (IPO). The company filed its Draft Red Herring Prospectus (DRHP) with SEBI in July and received the regulator’s final observation on 20 November. This is one of the IPOs in recent months which took more than 100 days to be cleared by SEBI.
According to the prospectus filed by the company, the IPO will involve sale of 31.1 million shares, or 36.83% of the total post-issue shares in the company.
As with most other issues these days, this latest IPO will offer an exit to existing shareholders (that’s an impressive list but more on it later) which plan to sell 19.5 million shares through the IPO. The other 11.6 million shares will be issued by the company. Kotak Mahindra Capital Company, Edelweiss Financial Services, Goldman Sachs (India) Securities, IDFC Securities, IIFL Holdings and Yes Bank are the merchant bankers handling the issue while Karvy is the registrar to the IPO.
While the company has not disclosed the issue size, it plans to raise at least INR2.35 billion by selling 11.6 million shares. It is important to note that the company will not get any proceeds from the shares offered by existing shareholders. Out of the total, INR519 million has been allocated for purchase of medical equipment while INR368 million will be used to buy IT software, services and hardware. However, the biggest chunk of INR1.47 billion has been set aside for pre-payment of debt.
The list of existing shareholders willing to sell their shares is rather long in the case of HealthCare Global Enterprises. The biggest among these is PIOF which intends to sell 7.69 million shares while India Build-Out Fund aims to offload 6.1 million shares. PIOF is the investment vehicle of Azim Premji’s PremjiInvest and holds 21.11% stake in the company. India Build-Out Fund holds 17.22% stake in HealthCare Global Enterprises. PIOF and India Build-Out Fund plan to halve their shareholding in the company. In addition, AOPL, V-Sciences plan to offer their shares.
Since HCG is a hospital, several doctors have equity ownership in the company and some of these shares are desperate to come to the market. Selling shareholders here are Dr. BS Ajai Kumar, Dr. G Kilara, Dr. K Harish jointly with Shubha Harish, Dr. Nalini Kilara, Ganga Ramaiah, Gangadhara Ganapati, Rajesh Ramaiah, Shubha Harish jointly with Dr. K Harish.
Poor profitability record
The cancer specialist operates one of the largest cancer care networks in the country under the HCG brand name and currently counts 15 centers in its network. HealthCare Global Enterprises has been consistent with its revenues, more than doubling its top line over the last five years. However, this consistency has gone out of window in case of profits which stood at mere INR5.46 million in last fiscal. Read more about HealthCare Global Enterprises’ financial performance here.