Rainbow Childrens Medicare - Paediatric, perinatal focus to the fore...

What's Buzzing? 

Rainbow Childrens Medicare (RCML) is a leading paediatric and perinatal focused hospital chain in India. Paediatric services include healthcare services for children from birth throughout its childhood and adolescent years. Perinatal services are probably to extend the ecosystem covering pre-term births and birth related defects besides specifically targeting C-section procedures. As per WHO, India has the highest pre-term growth incidences globally. 

Context 

RCML operates via 16 hospitals and three clinics in six cities, with a total bed count of 1,655 beds. It enjoys expertise in the most case-sensitive healthcare cohorts that is paediatric and perinatal care encompassing areas like neurology, nephrology, oncology and cardiology among others. Its efficient synergy across its services makes it a standout player among peers. Bed addition across cities like New Delhi, Chennai, Bengaluru, Hyderabad in the next four to five years would help expand its presence. The company’s hub & spoke model is likely to aid growth with wider accessibility for patients. 

Our Perspective 

We believe the X-factor for RCML is its calibrated focus on a model, which is still in a nascent state in India and up to now has thrived only in some developed economies. It has chalked out an aggressive capex plan to capitalise on its expertise and replicate its success of Hyderabad, in other cities. Strong overall financial ratios and hospital specific ratios are expected to provide a solid ground for future expansion. RCML's capability to utilise the size of its operations and continuously work to increase the capacity utilisation at all of its hospitals should support growth in the near future. Its plan to streamline procurement processes by focusing on centralised and standardised procurement of medical equipment and consumables should support its operational performance. While its surgical work is shifting toward minimally invasive surgeries, it is continuously focusing on reducing the length of hospital stays. This is expected to have a positive effect on key operational indicators, going forward. We believe the premium valuation is justified based on strong financials and a strong paediatric moat.