Krishna Institute of Medical Sciences or KIMS’ IPO has gone live on June 16, 2021. A private healthcare services company with a stronghold in Andhra Pradesh and Telangana, the company is likely to give fair competition to other listed stocks like FORTIS and Apollo Hospitals. Let’s talk about what the IPO has to offer.

The Business Model

  • Broadly speaking, any hospital has two sources of revenue, an In-Patient Department(IPD) and an Out-Patient Department(OPD). A minor health checkup, a follow-up checkup after surgery, or a regular visit to a physician counts as an OPD. Anything major involving critical care or a stay at the hospital is handled by IPD
  • For the Indian Healthcare Industry, ~70% of the revenue comes from Inpatients which includes surgeries, critical care, general care, and other care.  An interesting pattern was observed over the IPD and OPD figures. It seems that KIMS makes most of its money only through IPD. The volumes for inpatients is relatively low but has pretty high revenue. The opposite is true for OPD, where the volumes are relatively high but revenue doesn’t seem significant for the volume. This could talk a lot about the way the healthcare system in general churns money. 
.2018201920209M 2021
Inpatient Volume 88,577 111,382 140,676 83,860
InpatientRevenue Rs 594.7 CrRs 717.6 CrRs 879.9 CrRs 778.3 Cr
Outpatient Volume  661,000 900,043 1,137,560557,071 
Outpatient
Revenue
Rs 152.7 Cr Rs 195.6 CrRs 238.8 CrRs 192.1 Cr
All Figures in Rs Crore
  • KIMS offers 25 types of speciality and super speciality services at its various hospitals. As of December 31, 2020, the total bed capacity of the hospital stood at 3064 beds across 9 locations viz. Secunderabad, Nellore, Rajahmundry, Srikakulam, Kondapur, Ongole, Vizag, Anantapur, Kurnool. Close to 50% of the group revenue comes from the KIMS Secunderabad facility. 
.2018201920209M 2021
Bed Capacity2,1202,8043,0043,064
% Occupancy75.83%71.83%80.49%72.00%
  • The major revenue-generating specialities for KIMS are Cardiac Sciences(20.98% of Group Revenue) and Neuro Sciences(14.67% of Group Revenue).
  • KIMS’ healthcare services are classified as ‘affordable’ to an extent. The company Average Revenue Per Patient(ARPP) was Rs 79,000 per person which is 41% less compared to the Industry Average of 1,12,000 per person. KIMS manages affordability by optimizing bed usage, cost management and variable compensation to doctors based on patients attended, work hours, the severity of case etc. 
  • The company prospectus states that it is working towards expanding in markets like Bangalore, Bhubaneshwar, Chennai and some cities in central India like Indore, Aurangabad, Nagpur and Raipur.
  • There are three factors that can add to the company’s performance: 1) Patient Volumes 2) Occupancy Rate of Beds 3) Cost Management Per Bed Occupied.

Finances

.2018201920209M 2021
Revenue7,000.49,238.67 11,287.28 9,773.77 
Profit(461.90)(485.86) 1,150.72 1,468.58
Debt7,032.122,880.97 3,207.79 2,146.30
All Figures in Rs Crore

From the table given above, we can concur that the revenue has grown significantly over the past three years. In fact, KIMS has managed to surpass past annual figures in just 9 Months of FY 2020-21. The company drove up from a loss in 2018 and surpassed FY 2019-20’s profit figures in just 9 months of FY 2020-21. Moreover, the company now holds less than one-third of the debt it owed in 2018.

.2018201920209M 2021
Average Revenue Per Occupied Bed18,80718,33418,30721,823
Average Length Of Stay(Days)4.494.474.345.30
All Amount In Rupees
  • The Average Revenue Per Occupied Bed(ARPOB) decreased between 2018-2020 till we saw a sudden spike in 2021, obviously due to the onset of COVID-19. The Average Length Of Stay(ALOS) too spiked in 2021. This increased the overall revenue and profits in 9M 2021. 
  • The company offers the best Return On Capital Employed as compared to its peers. KIMS offers a ROCE of 22% followed by Narayana Health at 16%, Apollo Hospitals at 12% followed by the rest. The company also offers the highest turnover ratio(1.4) in the industry along with Apollo Hospitals. This means that the company is able to generate revenue efficiently from the assets it owns.

IPO Details

IPO Opening DateJun 16, 2021
IPO Closing DateJun 18, 2021
Issue TypeBook Built Issue IPO
Face ValueRs 10 per equity share
IPO PriceRs 815 to Rs 825 per equity share
Min Order Quantity18 Shares
Issue SizeRs 2,143.74 crore
Fresh Issue2,424,242 equity shares of Rs 10
Offer for Sale23,560,538 equity shares of Rs 10
(aggregating up to Rs 1,943.74 crore)

The Bottom Line

The past year has been economically beneficial for the healthcare and pharma industry. It is evident from KIMS’ finances that the company has progressed in the time of the pandemic. The company needs to focus on diversifying its geography. While two-thirds of KIMS’ revenue comes from its Secunderabad and Kondapur facilities, other competitors like Apollo, Fortis and others are rather widespread.  

KIMS has an interesting model where doctors own a stake in many of their hospitals. Around 21% of its revenue comes from the top 10 doctors of the company. Although the company has managed to attract the best talent from the country, its revenue depends on very few doctors, any instance where the doctor decides to not work for KIMS could have an adverse effect on the revenue. 

Bed occupancy rates took a hit during COVID-19, however, things are returning to normal for hospitals. If the vaccination drive is successful and we do not see an adverse third-wave of COVID-19, we can expect the company to scale up and reach heights like never before. 

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