The Hindu Business Line : Wockhardt Hospitals: First IPO casualty since July 2006

The initial public offering of Wockhardt Hospitals, which has been subscribed only 20 per cent on its last day, has been abandoned after the company decided to pull out the issue.

The offer has been unable to garner subscriptions despite a downward revision in price band and an extension in the period of offer.

Unexciting

Wockhardt Hospitals has become the first IPO casualty since July 2006, to be unable to gather sufficient investor interest. This can be explained partly by an offer price that was perceived to be stiff in the current primary market conditions and partly by the unexciting performance of the listed companies in this space.

At the lower end of price band (Rs 225), the company had a valuation at an enterprise value (EV) multiple of about 44 times its estimated FY-08 EBITDA (earnings before interest, tax, depreciation and amortisation).

This was expensive when compared with Apollo Hospitals, which has five times the number of beds than Wockhardt Hospitals (1,374 beds), but commands an EV/EBITDA multiple of around 20 times on FY-08 earnings.

The last healthcare company to raise money through the IPO route Fortis Healthcare enjoys a valuation of about 42 times on the same parameter.

Poor returns

Stock returns in the healthcare sector have been negative with Fortis declining by 24 per cent till date from listing while Apollo, the sector leader, has given a tepid 4.5 per cent return in the past year.

Wockhardt, with 15 hospitals, has planned to add another 2,127 beds through six brownfield hospitals by end-2008 and four greenfield (to be entirely built by company) by end-2009.

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