MEDI ASSIST HEALTHCARE SERVICES LIMITED IPO: ALL YOU NEED TO KNOW

The IPO investors will be busy in the remaining days of January as quite a few IPOs are lined up. To get started, the IPO we cover today is Medi Assist Healthcare Services Limited (MAHSL). The IPO opens for subscription on 15 January and closes on 17 January. Let us look at all the relevant details to help you evaluate the company.

Medi Assist Healthcare IPO: Key Details

Below are the key details related to the MAHSL IPO:

• Issue Size: Rs 1,171.58 crore
• Price Band: Rs 397 - Rs 418
• Lot Size: 35 Shares
• Issue Details: Only Fresh Issue
• Market Cap: At the upper price band, Rs 2,878.32 crore
• Minimum Investment: Rs 14,630

Medi Assist Healthcare IPO: Know the business

MAHSL provides third-party administration services to insurance companies through their wholly owned subsidiaries, Medi Assist TPA (Third Party Administrators), Medvantage TPA (from February 13, 2023), and Raksha TPA (from August 25, 2023). A third-party administrator is an organization that processes health insurance claims for insurance companies and provides services such as policy administration, customer service, and network management, among others.

Their technology-driven infrastructure and services are custom-built, and assist various stakeholders such as insurance companies, hospitals, insurance brokers, and insurance agents in their operations, and are scalable, comprehensive, easy to use, and secure. It enables them to offer a comprehensive healthcare solution to their customers, encompassing an extensive in-patient and out-patient network, on-demand health services, robust management of fraud, waste, and abuse, and effective medical inflation control.

They have serviced over 9,500 group accounts across sectors to help administer the insurance requirements of their employees. As of March 31, 2023, Medi Assist TPA and Medvantage TPA managed around Rs 128.18 billion of group health insurance premiums, representing 27.61% of India’s overall group health insurance market. 

Their market share in the overall group health insurance market serviced by third-party administrators was nearly five times that of their nearest competitor in FY22. They also service individual insurance policyholders, and for FY23, they managed Rs 17.57 billion of premiums for the retail health insurance market, representing 5.06% of the overall retail health insurance market in India.

Medi Assist Healthcare IPO: Industry Overview

Health has the largest share and is the fastest-growing insurance segment in the general/ non-life category, with a high headroom for future growth largely driven by group policies and private insurance sector growth. We have seen a 31% jump in insurance penetration post-COVID and a significant jump in insurance penetration in group policies during the pandemic.

Only 15.20% of the population in FY22 was covered under private health insurance (36.97% inclusive of government schemes), resulting in high out-of-pocket expenditure for most of the population. Private health insurance penetration is expected to reach 33.36% in FY28, driven by increased corporate employment, higher awareness of the need for insurance, and better insurance distribution.

Employer group policies largely drove the increase in lives covered in recent years as more and more companies became employee-centric and started offering group health plans and various health and wellness benefits. The segment contributed 18.16% (CAGR) growth between FY17 and FY22. In line with recent trends, this segment, in terms of lives, will continue to be the fastest growing, with a forecasted CAGR of 16.60% between FY22 and FY28. 

The government policies covered nearly 59% of the lives covered in FY22, largely driven by initiatives by various states and central governments to cover vulnerable families. Despite short-term fluctuations, government policies are expected to account for ~50% of the covered lives in FY28.

Listed Peers

There are no listed companies in India that engage in a business similar to that of MAHSL and its subsidiaries. Accordingly, it is not possible to provide an industry comparison in relation to them. 

Medi Assist Healthcare IPO: Financial Performance

Let us look at MAHSL's financials to give you an idea of how the company has grown in recent years. Below are the recent years' financial numbers (restated consolidated):

• The company has reported a revenue of Rs 322.74 crore, Rs 393.81 crore, and Rs 504.93 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 25.04% CAGR in this period. 
• Their subsidiaries, Medi Assist TPA and Medvantage TPA contributed to 96.32% of their revenue from contracts with customers in FY23, and subsidiaries, Medi Assist TPA, Medvantage TPA, and Raksha TPA contributed 92.98% of their revenue from contracts with customers in the six months ended September 30, 2023.
• MAHSL has reported an EBITDA of Rs 98.43 crore, Rs 112.04 crore, and Rs 133.37 crore for FY21, FY22, and FY23, respectively. The adjusted EBITDA margin for the same period was 23.42%, 23.16%, and 23.64%, respectively.
• They have reported a net profit (PAT) of Rs 26.27 crore, Rs 64.22, and Rs 74.04 crore for FY21, FY22, and FY23. 
• For the last three financial years, JMAHSL has reported an average EPS of Rs 9.06 (from continuing and discontinued operations) and 9.40 (from continuing operations), an average RoNW of 17.46% (from continuing and discontinued operations) and 18.22% (from continuing operations).
• Based on restated net profit of Rs 45.26 crore for H1FY24 with annualized earnings attribution to post-IPO equity capital, the P/E is 31.79. 
• The Return on Capital Employed (RoCE) for FY21, FY22, and FY23 was 20.43%, 22.02%, and 24.95%, respectively.

Medi Assist Healthcare IPO: Competitive Strength

Below are the competitive strengths of MAHSL:

• They are well-established Third Party Administrators (TPA) in India.
• The company has scalable technology-enabled infrastructure addressing the needs of all constituents of the health insurance ecosystem.
• MAHSL has longstanding relationships with a majority of insurance companies.
• It has a diversified base of group accounts with longstanding relationships.

Medi Assist Healthcare IPO: Associated Risks

Below are the risks associated with their business:

• Their five largest clients by revenue contributed 78.23%, 78.95%, and 77.97% of their total revenue for FY21, FY22, and FY23 from contracts with customers, respectively. The loss of one or more such clients will impact their business.
• The business is significantly dependent on group accounts in certain industries.
• Their income from benefit administration services provided to insurance companies across their group and retail portfolio is largely generated as a percentage of premiums under management and any decline in premiums under management may adversely affect their future revenues and profitability.

They derive a significant portion of their revenue from contracts with customers from subsidiaries.