Shanmuga Hospital Ltd. IPO: Key Details

Shanmuga Hospital

• Shanmuga Hospital is coming out with an initial public offering (IPO) of 38,18,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 54 per equity share.
• The issue will open on February 13, 2025 and will close on February 17, 2025.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.40 times higher to its face value of Rs 10. 
• Book running lead manager to the issue is Finshore Management Services.
• Compliance Officer for the issue is Veera Pratap Reddy Gandluru.

Profile of the company

Shanmuga Hospital, a Multispecialty Hospital, was strategically established in Salem. Equipped with advanced healthcare technology and having 151 bed capacity, it addresses the community’s medical needs, serving patients from nearby regions. Accredited by the National Accreditation Board for Hospitals and Healthcare (NABH Accredited) and National Accreditation Board for Testing and Calibration Laboratories (NABL Accredited), its hospital is committed to high-quality healthcare services, including prevention, treatment, and rehabilitation.

Its medical facility encompasses an Oncology Unit, High Dependency Unit (HDU), Emergency Department (ED), Outpatient Consultation Services, Cardiac Care Unit (CCU), Intensive Care Unit (ICU), Neonatal Intensive Care Unit (NICU), Labour Room, Endoscopy Room, Neurosurgery Unit, and Cardiac Unit. The Diagnostic Centre features advanced laboratory and imaging technologies such as X-Ray, Ultrasound, Computed Tomography (CT) scan, Magnetic Resonance Imaging (MRI), and modular operational theatres. Providing extensive inpatient and outpatient care across various Medical and Surgical specialties, its facility is well-equipped to meet diverse healthcare needs.

The company’s success comes from providing quality healthcare at affordable rates, appreciations to its skilled medical professionals who connect personally with patients. It has built a reputation for delivering top-notch medical services at competitive prices. As a growing organization, its goal is to solidify its position as a leading healthcare provider. It is committed to continuous improvement in its facilities, aiming for a higher standard of care and quality. 

Proceed is being used for:

• Funding capital expenditure towards purchase of additional medical equipment
• General corporate purposes 

Industry Overview

Healthcare has become one of India’s largest sectors, both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services, and increasing expenditure by public as well as private players. The Indian Healthcare industry continued its healthy growth in 2023 and reached a value of $372 billion driven by both the private sector and the government. As of 2024, the Indian healthcare sector is one of India’s largest employers as it employs a total of 7.5 million people. Progress in telemedicine, virtual assistants, and data analytics is expected to create 2.7-3.5 million new tech jobs. India’s public expenditure on healthcare touched 2.1 % of GDP in FY23 and 2.2% in FY22, against 1.6% in FY21, as per the Economic Survey 2022-23. India's hospital market was valued at $98.98 billion in 2023, projected to grow at a CAGR of 8.0% from 2024 to 2032, reaching an estimated value of $193.59 billion by 2032.

In FY24 (Till February 2024), premiums underwritten by health insurance companies grew to Rs 2,63,082 crore ($31.84 billion). The health segment has a 33.33% share in the total gross written premiums earned in the country. Indian medical tourism market was valued at US$ 7.69 billion in 2024 and is expected to reach US$ 14.31 billion by 2029. According to India Tourism Statistics, around 634,561 foreign tourists came for medical treatment in India in 2023, which was nearly 6.87% of the total international tourists who visited the nation. With $5-6 billion size of medical value travel (MVT) and 500000 International patients annually, India is among the global leader destinations for international patients seeking advanced treatment. The e-health market size is estimated to reach $10.6 billion by 2025. As per information provided to the Lok Sabha by the Minister of Health & Family Welfare, Dr. Bharati Pravin Pawar, the doctor population ratio in the country is 1:854, assuming 80% availability of 12.68 lakh registered allopathic doctors and 5.65 lakh AYUSH doctors.

India’s healthcare sector is extremely diversified and is full of opportunities in every segment, which includes providers, payers, and medical technology. With the increase in the competition, businesses are looking to explore the latest dynamics and trends which will have a positive impact on their business. The hospital industry in India is forecast to increase to Rs 8.6 lakh crore ($132.84 billion) by FY22 from Rs 4 lakh crore ($61.79 billion) in FY17 at a CAGR of 16-17%. India is a land full of opportunities for players in the medical devices industry. The country has also become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of the population. Besides, Indian medical service consumers have become more conscious towards their healthcare upkeep. Rising income levels, an ageing population, growing health awareness and a changing attitude towards preventive healthcare are expected to boost healthcare services demand in the future. Greater penetration of health insurance aided the rise in healthcare spending, a trend likely to intensify in the coming decade. The Government aims to develop India as a global healthcare hub and is planning to increase public health spending to 2.5% of the country's GDP by 2025. 

Pros and strengths

Oncology presence: One of its standout competitive strengths lies in its robust oncology department. With a dedicated team of oncologists, state-of-the-art technology, and advanced treatment modalities, it is at the forefront of cancer care in the region. The company’s comprehensive oncology services encompass diagnosis, treatment, and supportive care, ensuring that patients receive holistic and personalized treatment plans tailored to their specific needs. Its commitment to excellence in oncology care has established it as a trusted destination for cancer treatment, attracting patients from far and wide seeking the highest standards of care and expertise.

Cost affordable to regional population: A key competitive advantage for Shanmuga Hospital is its unwavering commitment to providing high-quality healthcare services at affordable prices tailored to the needs of the regional population. Recognizing the diverse socioeconomic backgrounds of its patients, it has implemented cost-effective measures and streamlined processes to minimize healthcare expenses without compromising on quality or safety. Its transparent pricing policies, coupled with financial assistance programs and payment plans, ensure that patients have access to the care they need without facing undue financial burden, further strengthening its bond with the community and enhancing patient satisfaction.

Tie-up with government and private insurance companies: Another significant competitive strength of Shanmuga Hospital is its strategic alliances with government agencies and private insurance companies. These collaborations enable it to expand access to healthcare services, streamline administrative processes, and provide financial assistance to patients through cashless treatment facilities and insurance coverage. By partnering with government health schemes and leading insurance providers, it ensures that patients can avail themselves of its services seamlessly, regardless of their financial circumstances or insurance coverage. This strategic advantage not only enhances patient convenience and satisfaction but also reinforces its position as a preferred healthcare provider trusted by both public and private stakeholders.

Risks and concerns

Substantial portion of revenues comes from few customers: The company’s revenue comes from In-patient and Out-patient and through tie-up arrangements with governmental organisations and corporate entities. While its in-patient and Out patients cannot be categorised under the top ten category however based on the patients who come through Governmental organisations and corporate entities under the tie-up arrangements, its top 10 customers relating to such Governmental organisations and corporate entities contribute 43.01%, 45.70%, 48.51% and 44.98% of its revenues during September 2024 and the financial year 2023-24, 2022-23 and 2021-22 respectively, whereas, its top 5 customers contribute 40.35%, 42.57%, 45.64% and 36.44% of its revenues during September 2024 and the financial year 2023-24, 2022-23 and 2021-22. However, the loss of any significant customer would have a material effect on its financial results.

Substantial portion of its purchases of medicines is dependent upon few suppliers: The company’s top 10 and top 5 suppliers contribute majority of its purchase during September 2024 and the financial year 2023-24, 2022-23 and 2021-22. Its top 10 suppliers contribute 30.91%, 30.46%, 25.82% and 28.41% of its purchase of medicines during September 2024 and the financial year 2023-24, 2022-23 and 2021-22 respectively, whereas, its top 5 suppliers contribute 23.10%, 20.74%, 18.13% and 20.29% of its purchase of medicines during September 2024 and the financial year 2023-24, 2022-23 and 2021-22 respectively. The company has not entered into long term agreements with the suppliers and the success of the business is accordingly dependent on maintaining good relationships with the various suppliers for regular supply of medicines required. The inability of a supplier to meet these requirements, the loss of a significant supplier, could disrupt the supply of medicines which may have an adverse effect on business, results of operations and financial condition of the company.

Limited operating history: The company was originally incorporated as a Private Limited Company under the name 'Shanmuga Hospital Private Limited' on June 26, 2020, in accordance with the Companies Act, 2013. Subsequently, the company converted into a public limited company, resulting in a name change to “Shanmuga Hospital Limited”. Post incorporation, the company acquired business undertaking of “Shanmuga Hospital (Partnership Firm)” pursuant to business transfer agreement dated December 15, 2023. As the company does not have significant operating and financial history in Shanmuga Hospital Limited, it may be difficult to evaluate its current or future prospects on the basis of historical results and performance. However, its group has experience of more than 40 years in running hospital since 1981. Past performance of its group should not be construed as an indication of its future performance.

Outlook

Shanmuga Hospital is a Multispecialty Hospital and equipped with advanced healthcare technology and having 151 bed capacity, it addresses the community’s medical needs, serving patients from nearby regions. The company has specialized equipment like LINAC, CATHLAB, MRI, MODULAR OT and has tie-up with Government and Private Insurance Companies. On the concern side, the company generate certain revenues from the arrangements with government sponsored health schemes, any adverse change in these regulations/government policies related to such schemes may adversely affect its business, results of operations, cash flows and prospects. Moreover, the company has limited operating history, and therefore investors may not be able to assess its prospects on the basis of historical results.

The company is coming out with an IPO of 38,18,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 54 per equity share to mobilize Rs 20.62 crore. On performance front, the overall revenue from operations has increased to Rs 4,303.74 lakh in FY 2023-24 from Rs 3,934.47 lakh in FY 2022-23 i.e. revenue from operation increased by Rs 369.27 lakh (9.39% for the said period). Moreover, the restated profit after tax for FY 2023-24 has been increased to Rs 526.15 lakh (12.13% of total income) as against Rs 476.22 lakh (12.06% of total income) in the FY 2022-23.

The company is a growing organization that aims at strengthening and establishing itself as the foremost healthcare services provider. It strives to serve with its ultra-modern medicinal practices and state of the art infrastructure for medical as well as surgical care solutions. Moreover, the location is the prime importance for the hospital to run successfully. Its hospital is situated at Saradha College Road, Salem, Tamil Nadu, which is well developed and one of the prime locations of Salem City. Its hospital is having around 45,311 sq. ft. area. The location is well connected by road hence the inflow of patients from various part of the city is easy.