News Analysis

Krishna Institute of Medical Sciences IPO: Healthy listing

Sai Prabhakar Yadavalli | Updated on June 28, 2021

The company’s execution track record is good

BL Research Bureau

Krishna Institute of Medical Sciences (KIMS) opened at ₹1,009 or 22 per cent premium compared to the IPO price of ₹815 – 825 per share. The company has primarily held on to these gains during the trading day. The listing day valuation pegs the company at 38 times FY21 earnings compared to 31 times valuation at the IPO time. Long term investors who have been allotted the shares can hold on to the shares of the growing healthcare provider, in line with our subscribe recommendation for the IPO.

 

KIMS has shown resilient growth by expanding conservatively and ensuring sustainable growth from its investments. The company is now expanding outside of its stronghold states of Andhra Pradesh and Telangana by carefully studying the patient flows, micro pockets of underpenetrated markets, and brand recall in neighbouring states. The hospital chain has generated margins above other hospital operators as the new hospitals added in the last four years have moved beyond break even.

The valuation range for healthcare service providers has been obscured by the recent Covid impact (KIMS managed to perform well even in this period) and high expectations of growth from the industry.

Even so, KIMS’ first-day valuation at 38 times FY21 earnings based on listing day gains cannot be considered high compared to established peers like Apollo Hospitals (83 times FY20 EPS) and Narayana Hrudayalaya (102 times FY20 PE) observed in a relatively normal year of FY 2020. The valuation of peers is even more expensive in covid impacted FY21.

Published on June 28, 2021

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