Public party - Part 2

In the second part, a look at Narayana Hrudayalaya and diagnostic player Thyrocare

It’s not just the financial sector, a clutch of companies from the healthcare industry have also floated IPOs. Narayana Hrudayalaya, Thyrocare Technologies, Dr Lal PathLabs and HealthCare Global Enterprises (HCG) together have raised around Rs.2,400 crore. 

Bangalore-based HCG though, has found the going tough because of its debt burden. For 4QFY16, the company reported sales of Rs.153 crore, posting a growth of over 16% YoY. However, its net margin was a measly 2.4% at Rs.3.6 crore. While it is better than the loss of Rs.25 lakh reported last fiscal, the debt of Rs.370 crore is an overhang. 

Moreover, aggressive expansion is taking a toll. Despite a capacity utilisation of 50%, the company is looking to add 12 new cancer centres. So, while HCG is looking to repay Rs.147 crore of its existing debt, the overall burden may remain the same. 

The company is also facing delays in executing projects due to government approvals, construction, technical and regulatory concerns. This has led to significant cost overruns. Between FY11-15, EBITDA margin has contracted 290 basis points to 14.7%. 

The valuation, thus, has come down, with the stock currently trading at 20.7x FY16 EBITDA. When the issue was launched on March 16, it was 24x (at the upper price band of Rs.218) FY15 EBITDA of Rs.76 crore. 

While the debt is hurting, it has the largest number of cancer treatment centres in India where the demand-supply gap is huge. A report by ICICI Direct claims that India has only 200-250 comprehens


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