JUPITER LIFE LINE IPO OPENS FOR SUBSCRIPTION ON 6TH SEPTEMBER

The second IPO that opens for subscription this week is Jupiter Life Line IPO. Earlier in the week, Ratnaveer Precision Engineering Limited IPO opened for subscription. You can check the details here. In this article, we will cover various aspects related to Jupiter Life Line, which will help you decide whether to subscribe or invest in the IPO for the long term. 

Jupiter Life Line IPO: Key Details

Below are the key details related to the Jupiter Life Line (JLL) IPO:

• Issue Size: Rs 869.08 crore
• Price Band: Rs 695 - Rs 735
• Issue Details: Rs 542 crore Fresh Issue + Rs 327.08 crore Offer For Sale (OFS)
• Market Cap: At the upper price band, Rs 4,819 crore
• Minimum Investment: Rs 14,700

Jupiter Life Line IPO: Understanding the business

Jupiter Life Line is among the key multi-specialty tertiary and quaternary healthcare providers in the Mumbai Metropolitan Area (MMR) and western region of India, with a total bed capacity of 1,194 hospital beds across three hospitals as of March 31, 2023. 

They commenced operations in 2007 with a hospital in Thane, Maharashtra, and subsequently scaled their operations by setting up a hospital in Pune, Maharashtra (2017) and acquiring a hospital in Indore, Madhya Pradesh (2020).

The company follows a ‘patient first’ ideology by creating the best infrastructure, technology, and support to put the patient first and foremost and be futuristic and innovative in the delivery of healthcare. They have equipped their hospitals with over 30 specialties, including key specialties of organ transplant, oncology, orthopedics, cardiology, pediatrics, neurology, and neurosurgery, and certain specialized quaternary services and precision-based treatments such as brachytherapy, radiotherapy, robotic knee replacement, and robotic neurorehabilitation.  

All three hospitals are located on land owned by the company on a freehold basis, which ensures operational control and allows them consistency in quality care, resulting in long-term operational and financial efficiencies. 

Jupiter Life Line IPO: Industry Overview

According to the Global Health Expenditure Database compiled by the WHO, in 2020, India's expenditure on healthcare was 3.0% of GDP. As of 2020, India’s healthcare spending as a percentage of GDP trails not just developed countries, such as the US and UK, but also developing countries such as Brazil, Nepal, Vietnam, Singapore, Sri Lanka, and Malaysia. Further, India’s public spending on healthcare services remains much lower than its global peers. 

India's current healthcare expenditure (CHE) is skewed more towards private expenditure compared with public expenditure. Government expenditure on healthcare has remained range-bound at 20% to 30% of the current healthcare expenditure from 2010 to 2016.

Breaching pre-COVID level in FY22, CRISIL MI&A Research estimates the Indian healthcare delivery industry to post a healthy 10% to 12% compound annual growth rate between FY22 and FY27, driven by long-term structural factors, strong fundamentals, increasing affordability, and potential of the Ayushman Bharat scheme. 

Jupiter Life Line IPO: Listed Peers

JLL has several listed peers. The list includes names like Apollo Hospitals Enterprise Ltd, Fortis Healthcare Ltd, Max Healthcare Institute Ltd, Narayana Hrudayalaya Ltd, Global Health Ltd, and Krishna Institute of Medical Sciences Ltd. Let us compare these listed peers with Jupiter based on some critical parameters:

• In terms of revenue (FY23), Apollo Hospitals has the highest revenue at Rs 16,702 crore. Jupiter Life Line has 1/18 of that revenue for the same financial year.
• Among the peers, Earning Per Share (EPS) is the highest for Apollo Hospitals, while Jupitar is 4th on the list. The average EPS of listed peers is approximately 27, while Jupiter has a basic EPS of 13.95.
• Return of Net Worth (RoNW) is also towards the bottom among all listed peers.
• The bed occupancy for JLL is 63%, placing it on the lower end of the table. The highest bed occupancy was reported by Max Healthcare at 76%.

Jupiter Life Line IPO: Financials

Let us now look at the most crucial part that one needs to consider while evaluating a company. Below are the financial numbers of Jupiter Life Line over the last three financial years:

• The company has reported a revenue of Rs 486.16 crore, Rs 733.12 crore, and Rs 892.54 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an excellent 35.48% CAGR in this period. 
• Thane Hospital contributes a large part of the total revenue. In the same period, the revenue from Thane Hospital was 64.50, 57.57%, and 54.18%, respectively.
• Patient volumes (comprising inpatient and outpatient) at the hospitals were 447,573, 645,446, and 773,937 in FY21, FY22, and FY23, respectively. 
• Jupiter Life Line has reported an EBITDA of Rs 71.27 crore, Rs 157.41 crore, and Rs 211.74 crore for FY21, FY22, and FY23, respectively. In the same period, the EBITDA margins were 14.54, 21.35%, and 23.45%, respectively. The EBITDA margins have increased every single year in this time frame.
• They have reported a net profit of Rs (2.30) crore, Rs 51.13 crore, and Rs 72.91 crore for FY21, FY22, and FY23. The profit margins have been on the rise - from (0.47)% in FY21 to 8.07% in FY23.
• For the last three financial years, the company has reported an average EPS of Rs 9.62 (diluted basis) and an average RoNW of 15.77%. 
• If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 66.10. 
• ROCE for FY21, FY22, and FY23 was 6.07%, 16.08% and 20.94%, respectively. ROE for the same period was (0.93)%, 17.73%, and 20.03%, respectively.
• The payor mix showcases that they have very low dependence on central and state government schemes for revenues, with payments made through (i) self-payers, (ii) insurance companies, third-party administrators, and corporations, and (iii) government schemes, accounting for 45.33%, 53.35% and 1.32%, respectively, of the income from hospital services in FY23.  
• JLL's debt to equity ratio was 1.29 as of March 31, 2023. 

What are the competitive strengths of Jupiter Life Line?

As per the company, their competitive strength is as below:

• They are a corporate quaternary care hospital located in densely populated micro markets in the western region of India
• The company can attract and retain skilled and experienced healthcare professionals. In FY21, FY22, and FY23, the attrition rate for doctors (who work as consultants at our hospitals) was 3.40%, 5.08%, and 1.85%, respectively, while the attrition rate for nurses was 26.58%, 31.81%, and 27.97%, respectively.
• Jupiter Life Line has delivered high operational and financial performance through high patient volumes, cost efficiency, and diversified revenue streams across hospitals. 
• They have an experienced and qualified professional management team with a focus on environmental, social, and governance (ESG) initiatives.

Risks associated with Jupiter Life Line

Below are the risks associated with JLL:

• As discussed above, a large part of their revenue still comes from a single hospital - Thane. 
• They are highly dependent on their healthcare professionals, including doctors and nurses, and any future inability to attract/ retain such professionals will adversely affect the business.
• The company incurs high expenses concerning medical equipment costs, manpower costs, infrastructure maintenance and repair costs, ancillary items, and pharmaceuticals. If they are unable to obtain favorable pricing from suppliers or negotiate compensation of healthcare professionals effectively, it could affect their profitability. 
• Certain public interest litigations have been initiated against the company about the land on which the Thane Hospital is situated.