Multi-specialty paediatric and gynaecology hospital chain Rainbow Children’s Medicare made its stock market debut today. Shares of Rainbow Children’s Medicare began trading at Rs 506 per share, down 6.6 per cent or Rs 36 from the upper end of IPO price band of Rs 542 per share, while the listing price on the NSE was Rs 510. At the time of listing, the market capitalisation of the company stood at Rs 5,135.99 crore. Upon successful listing, Rainbow Children’s Medicare has joined the likes of Max Healthcare Institute, Krishna Institute of Medical Sciences, Apollo Hospitals Enterprise, Narayana Hrudayalaya, and Fortis Healthcare.
The initial public offering of Rainbow Children’s Medicare was subscribed 12.43 times during April 27-29, largely supported by qualified institutional buyers whose reserved portion booked 38.9 times. Non-institutional investors bid 3.73 times the allotted quota, while the portion set aside for retail investors was subscribed 1.38 times and employees have put in bids for 31 percent shares of the reserved portion.
South-based Rainbow Children’s Medicare operates 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds, as of December 2021.
The company is significantly dependent on certain specialities for a majority of its revenues. It has four core specialities, namely secondary pediatric care, tertiary pediatric care, quaternary pediatric care and women care (gynecology, obstetrics, and related services.
On the financials front, the company reported a whopping 228 percent year-on-year increase in profit at Rs 126.4 crore for the nine-month period ended December 2021, and revenue jumped 56.6 percent to Rs 761 crore during the same period.
However, profit during the full year (FY21) fell 28 percent to Rs 39.6 crore compared to the previous year, and revenue dropped 9.6 percent to Rs 650 crore in the same period.
Rainbow has raised Rs 1,581 crore through its public issue that was comprised a fresh issue of Rs 280 crore and an offer for sale of Rs 1,301 crore by selling shareholders.
What Should Investors Do?
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “Rainbow Children’s Medicare Limited has debuted at Rs.510 i.e. 6 per cent below its issue price. The company’s muted listing can be attributed to volatile and negative market sentiments and a lack of investor interest in hospital businesses. The company has a specialized nature of business, an experienced management team, proven ability to attract, train and retain high-caliber medical professionals, but the hospital is a highly competitive business and normalization of profitability post covid makes it suitable only for aggressive investors for the long term. . Those who applied for listing gains can maintain a stop loss of Rs. 500.”
Yash Gupta- Equity Research Analyst, Angel One Ltd, said: “We expect a soft listing from Rainbow Children’s Medicare Limited IPO. Looking at the expensive valuation of the IPO, based on 9MFY22 numbers, the IPO is priced at a Price to Earn 30.4 times and EV/EBITDA of 13.8 times at the upper price band of the IPO, which is in line with a listed peer group. Companies’ revenue and return ratios have improved significantly in 9MFY22 but we don’t expect the company can maintain this growth in the near future. So overall we expect a soft listing of Rainbow Children’s Medicare Limited IPO and we suggest retail investors book profit who got the allotment and long-term investors can wait for a lower price.”
Sonam Srivastava, smallcase manager and Founder at Wright Research said the company has prudent fundamentals, with the revenue and profitability numbers seeing an upwards spurt in the last year.
“The valuation at which the IPO opened was in line with the market peers, and the IPO got a reasonable response. However, the grey market hints at par listing, which could be due to unfavorable market sentiment,” she added.
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