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Oncology chain HCG files documents for IPO; PremjiInvest, Temasek, IBOF to part-exit

03 August, 2015

Bangalore-based HealthCare Global Enterprises Ltd (HCG), one of the largest cancer treatment hospital chains in the country, has filed its draft red herring prospectus (DRHP) with securities market regulator SEBI to float its initial public offer (IPO).

Although the company is yet to freeze a price band, the proposed issue is expected to be worth around $100-130 million (Rs 640-840 crore), as per VCCircle estimates based on what it intends to raise through a fresh issue of shares.

Bulk of the money would go to selling shareholders including three of its private equity investors: PremjiInvest, the private investment arm of Wipro promoter Azim Premji; India Build Out Fund and Temasek, a state owned investment arm of Singapore government.

The offer would include 36.8 per cent of post-offer paid up equity share capital and may value the firm around Rs 2,275 crore ($356 million).

VCCircle had first reported in January that HCG has picked two bankers for its IPO and is looking to add more merchant bankers to handle the issue.

HCG would become the fourth significant public listed hospital chain in the country behind Apollo Hospitals Enterprise Ltd, Fortis Healthcare Ltd and Max Hospital, which is in the process of being spun off from its listed parent Max India Ltd.

A bunch of other hospital firms are also eyeing a public float in the near future including Aster DM Healthcare.

HCG joins a queue of companies who have filed documents for their IPOs. Many like HCG also happen to be PE backed firms.

Here’s a snapshot of the IPO

* Total of 31 million shares including fresh issue of 11.6 million shares and offer for sale of 19.4 million shares.

* Bankers: Kotak Mahindra Capital, Edelweiss, Goldman Sachs, IDFC Securities, IIFL and Yes Bank.

Use of proceeds

* From the fresh issue of shares, it plans to use Rs 51.95 crore for purchase of medical equipment; Rs 36.8 crore for investment in IT software, services and hardware besides Rs 147 crore for pre-payment of debt. Rest would be for other general corporate purposes.

Company

* Founded in 1998, HealthCare Global Enterprises provides speciality healthcare in India focused on cancer and fertility under the brand HCG. It started expanding operations since 2006.

* The company is promoted by a team of doctors led by the single largest shareholder BS Ajai Kumar.

* As of June 30, 2015, the company had 15 cancer centres, including centre of excellence in Bangalore, four free-standing diagnostic centres and one day care chemotherapy centre across, and 12 HCG comprehensive cancer centres under various stages of development in the country.

* HCG also provides fertility treatment under Milann brand. During fiscal years 2015 and 2014, its Milann fertility centres registered 8,027 and 7,617 new patients respectively.

* The other brand Triesta, provides clinical reference laboratory services in India with a specialisation in oncology, including molecular diagnostic services and genomic testing.

* HCG network operates on a “hub and spoke” model, wherein its HCG centre of excellence in Bangalore serves as a “hub” to its other cancer centres.

Financials

The company’s revenues has almost doubled between FY12 and FY15. It ended the year ended March 31, 2015 with total operating revenue of Rs 519 crore as against Rs 451 crore in the previous year. It clocked net profit of Rs 5.46 crore in FY15 as against net loss of Rs 35.5 crore in the previous financial year.

Investors

HCG had roped in a string of PE firms to back it over the years and has previously given exits to two of them—IDFC Alternatives and India Life Sciences Fund.

Among the existing investors, PremjiInvest, India Build Out Fund (now under Quadria Capital) and Temasek have offered to sell shares in the IPO.

While PremjiInvest and India Build Out Fund are looking to sell half of their holding, Temasek, which invested in the company just two years ago had offered to sell a quarter of its stake.


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Oncology chain HCG files documents for IPO; PremjiInvest, Temasek, IBOF to part-exit

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