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Want to invest in the Global Health IPO? Here are some risk factors to consider

Want to invest in the Global Health IPO? Here are some risk factors to consider

Want to invest in the Global Health IPO? Here are some risk factors to consider
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By Hormaz Fatakia  Nov 1, 2022 10:22:36 AM IST (Updated)

The IPO opens for subscription on Thursday, November 3.

Global Health Ltd., operators of the Medanta chain of hospitals, will issue shares to the public in an Initial Public Offering (IPO) worth Rs 2,200 crore. The chain will sell shares in a price band between Rs 319 - Rs 336.

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The IPO opens for subscription on Thursday, November 3. As always, multiple risk factors are highlighted by the company in its Red Herring Prospectus (RHP). Here are some of them:
Loss-making Subsidiaries
MHPL, one of the company's subsidiaries, has incurred losses in fiscal years 2020 and 2021. Another subsidiary, GHPPL has not only incurred losses in fiscal year 2020, 2021 and 2022, but also for the March-June period of 2022.
The company has cited GHPPL being under project phase until fiscal 2021 and the inpatient hospital of the Patna hospital commencing operations only during the end of fiscal 2022.
However, MHPL turned in a profit for fiscal year 2022.
The company has highlighted that these subsidiaries may need financial support from the parent in the form of debt or equity and that there is no certainty of them becoming profitable.
One of their erstwhile subsidiaries MDRIPL was under voluntary liquidation and was dissolved in December 2021.
Restricted Operations
Currently, Global Health Ltd. operates only five hospitals in Gurugram, Indore, Ranchi, Lucknow, and Patna. Additionally, it operates six multi-specialty clinics at DLF Cybercity Gurugram, Delhi Airport, South Delhi, Darbhanga, and Patna. Another unit in Noida is under construction.
Most of the company's revenue comes from these hospitals and any loss of business from here could adversely impact their financial condition.
The company also warns that under-construction facilities may experience delays in construction and reaching full operational capacity. "They may not achieve the synergies and other benefits we expect from such facilities," it wrote in its RHP.
High Rate of Attrition
As of June 30, the company had over 6,000 medical professionals, including 1,300 doctors, 3,700 nurses, and over 1,000 paramedical professionals.
However, the company highlights that there are some doctors who work only part-time and are engaged in private practice at other hospitals and clinics. Although there are binding agreements with these doctors, there is no assurance of them prematurely terminating these agreements.
For fiscal 2022, the rate of attrition of doctors and nurses stood in excess of 30 percent and 50 percent respectively. For the first three months of the current financial year, the attrition rate is in double-digits for both these segments.
The inability to retain these professionals may have an adverse financial impact on the company, according to its RHP.
Removal Of Fiscal Benefits
The company and its subsidiary MHPL are currently availing certain concessions under the Export Promotion Capital Goods Scheme of the Government of India.
The EPCG scheme allows import at zero custom duty and requires the importer to export 6x the duty saved on capital goods within six years from the date of issue of authorisation.
As of June 30, the company's export obligations under the scheme stood at Rs 298.1 crore. The company warns that results of operations may be affected in case there is a default under this scheme or if these concessions are reduced or withdrawn.
Global Health has also warned that the company's subsidiary, MHPL, may not be able to meet the required export value obligations under the scheme, within the stipulated timelines. Therefore, it had a reversal of custom duty and interest on custom duty payable in fiscal year 2022.
Pledged Shares
The company has issued equity shares over the last 12 months which may be lower than the offer price of the IPO, according to the RHP.
Additionally, 75 lakh equity shares of the company have been pledged by Sunil Sachdeva, Suman Sachdeva, and SAS Fininvest LLP in favor of IIFL Wealth Prime Ltd. as security for a loan.
The loan amount or the price at which securities have been issued over the last 12 months are not specified. The pledged shares will not be part of the Offer for Sale component of the IPO.
IIFL Wealth consented to release the pledge shares temporarily with a caveat that these shares will be re-pledged within three days of them listing.
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