IPO Review – Global Health Ltd. Vs Bikaji Foods International Ltd. | CA Rachana Ranade
Hey folks!!! CA Rachana Ranade here and I welcome you all to a very interesting video wherein I am going to cover two IPO analysis. Now which two companies? First of all I am going to talk about Bikaji Foods International Limited and second I’m going to talk about Global Health Limited, Pahale khane ki bat karenge then we will talk about hospital and all that okay so first we are going to start about Bikaji Foods International Limited but first and foremost what does the company do? Well the company majorly operates in three business segments but if you
were to understand the products in absolute detail let’s have a bird’s eye view. When the three major segments are Indian savory snacks also known as namkeen, second one is Indian sweets and the third one is papad Indian savory snacks are further divided into two parts the very first one is Traditional snacks and the second one being Western snacks. Traditional snacks categories further divided into three subcategories the first one being Namkeen, the second one Bhujia and the third one being Ethnic snacks. Namkeen snacks can be like Farsan, Aloo sticks, Nuts, Chana Chor garam. Well Bhujia can
be something like Sav or even normal bhujia sav, Ethnic snacks can be like dry Samosa, Kachori, Chakli and a lot more, well if
product segments in absolute detail now let’s go to the product wise sales contribution. Now for that have a look at this pie chart you can see that 35 percent of the total sale is contributed by Bhujia. 39% is contributed by Namkeen and balance Sweets, Papad, the western snacks others all these contribute to around 26 percent. Now before we move on to the industry analysis let me tell you one interesting fact about this IPO you’ll be amazed to know that the average cost per share for the founders of this company is just 16 Paisa and 14
Paisa respectively and they are going to offer this share at 300 rupees per share, well if you remember we had talked about one important point that this company has products which can be divided into three major segments the very first one was Indian Savory Snacks, second one was about Sweets, and third one was about Papad so now what we are going to do we are going to understand some key points at the industry level for all these three segments. The very first one Indian Savory snacks now this entire industry is valued at 751 billion rupees
in 2022 and it is expected to grow at a CAGR of 13%, now out of this 751 billion rupees industry organized players account for only 56.3 percent so I hope you are understanding that there is a lot of headroom left for this organized space to grow. If I go on to the Sweets industry it is it is valued at 535 billion rupees of market value but out of which 90 percent belongs to the unorganized sector but I believe that after covid-19 pandemic the importance of organized sector in this space is also increasing slowly and steadily
and Bikaji right now has a market share of six percent in the organized Sweet Market. Moving on to the last one industry analysis for Papad segment as of 2022 Indian proper Market is valued at 78 billion rupees out of which organized segment is valued at 26 billion rupees is estimated to grow at a CAGR of 10 percent by 2026. Well now talking about the financials of the company the revenue of the company grew at a CAGR of almost 22 percent from Financial year 2020 to 2022 but PAT grew at a CAGR of 16 percent now
you might be like why did PAT grow at a lower CAGR as compared to the Top Line? There are few reasons for that the very first one is increase in the cost of raw material consumed now if you are talking about Bhujia, Sav and all that Papads and all that you will definitely need a lot of oil and the oil prices have grown quite a bit in the past few months and that is the reason why costs have increased not only raw material cost but finance cost other expenses such as power and fuel or advertisement
cost, legal costs all have gone up and because of which the EBITDA margins have also seen a dent where EBITDA margin financial 2022 stood at 8.66 percent whereas in financial 2021 they stood at 11.04 percent, if I’m talking about the cash flows of the company yes the company has positive cash flow from operating activities but but it is half of that of the previous year’s cash flows and if you are talking about the free cash flows it is negative. Let’s move ahead with the valuation and as per the RHP of the company it has four
listed peers which are Pratap snacks limited, DFM Foods limited, Nestle India and Britannia Industries limited. However as per the RHP the industry average is computed using only two listed peers which is Pratap snacks and DFM Foods, very much logical Britannia is more into biscuits and if you have if you remember the products this company is not really into biscuits right so it’s not technically a proper peer for this company, now if I look at the P ratio of Bikaji it comes out to almost 95 whereas the industry average is 204 so I can say as
far as P is concerned it is fairly valued ah or in fact a lot of room is also left for the valuation P to BV ratio if I am talking about for because it comes out to around nine but the industry average comes to eight, well if you ask me in the current scenario does this valuation seem to be fair? I would have been a little bit more happy if the issue price of the shares could have been kept at a little bit lower price than that what they have offered right now, but is this
the only point I think if you look at the flip side as well if I am talking about the some positive side which I would want to look out for it would be the Q3 numbers that a company would announce in the coming few months reason is very simple they are into all these namkeen and snacks and sweets and all that right so if we talk about Diwali, if we talk about Christmas, if we talk about the wedding season ideally Q3 numbers for this company could be good so I would want to look at the
Q3 numbers and then I would be in a much better position to take a final decision. Well let’s quickly go ahead and discuss some positives and negatives about the company the very first positive point is that it is a well-diversified brand it also has a nice diversified product portfolio, it has extensive distribution network and also it has some sophisticated manufacturing facilities but are there any negative points as well? And answer is obviously yes, there are almost 30 criminal litigations outstanding against the company, its directors its promoters and which involves an amount of almost 23.77 million
rupees also their top lines significantly depends on the sale of two major items one is bhujia and the other one is namkeen with these basic positives and negatives let’s also quickly understand the IPO details about the company the issue opens on 3rd of November closes on 7th of November issue size is 881.22 crores but it’s an entire OFS, 100% offer for sale it means that not even one rupee is going to go towards the company entire proceeds will be going to the selling shareholders of the company, price band is 285 to 300 lot size is
50 employees count is going to be 15 rupees per share. Well just to sum up the entire IPO right now I think it’s neither too sweet nor too hot it’s a namkeen IPO, the big question am I going to take it in my investment plate or not? For that you have to check out my live stream on 7th of November 2022 I’ll be coming live at 10.30 am to tell you my final decision but just to give you a hint right now I feel that financials are as I said Nam Keen means what fine beat
financials or valuation or overall model it’s not a bad category so I would also want to take a close look into the GMP, into the overall subscription status and then take a final call. Eating Papad, Bhujia, Sweets and all that is not bad but if you over eat all these things then you know what will you have to or where you will have to go to you have to go to a hospital maybe and that’s what we are going to discuss right now we are going to discuss about the second IPO which is Global Health
Limited. Currently the company operates under the Medanta brand and the company has a network of five hospitals currently in Gurugram, Indore, Ranchi, Lucknow and Patna, sixth is under construction and that is happening at Noida, it also has six multi-specialty clinics right now Global Health Limited is one of the largest private multi-specialty tertiary care providers operating in north and east regions of India. Wait we will go one by one it is one of the largest private multi-specialty now what is multi specialty so they will basically have they specialize in what in Cardiology, Cardiac sciences Neurosciences, Oncology,
Digestive and Hepatobiliary Sciences, Orthopedics, Liver transfer on kidney and Urology Oh My God so they specialize in all these areas right and so largest private multi-specialty tertiary Care. Now what is this Tertiary care? Primary care is basically when you go to your normal family doctor or something like that correct secondary care can be when you see a specialist something like an Oncology Specialist or something like that Tertiary care refers to Specialized Care but in a hospital setting so something like Dialysis or Heart surgery and Quaternary Care is like an advanced level of Specialized Care so
now that you’ve understood this primary, secondary, tertiary and quaternary. Where does this company stand? They provide Tertiary Services, can I say it’s more of a specialized service that they are giving. Now you can imagine something that if a patient unfortunately has to you know take such services something like Dialysis or Heart surgery, patient will not think about the cost, they will be like save the patient take how much you ever you want but we want the patient to be saved and that is where I think this company can have the benefit of a pricing power
as well right, now if I were to talk so they don’t only have the pricing power but one amazing point that I read in their RHP was that they are ranked as the best Private Hospital in India for three consecutive years that is 2020, 21 and 22 and it was the only Indian Private Hospital to be featured in the list of top 200 Global Hospitals in 2021 and top 250 Global Hospitals in 2022 by Newsweek. Well now that you have understood that Global Health Limited is nothing but kind of a chain which is having its
presence in five cities and also have understood that they are more into specialized treatment right if this is into our mind now we have to understand a little bit more about the industry analysis so let’s have a look at this chart, here you can see that overall if I’m talking about bed density across countries this is about per 10,000 people how many hospital beds we have India only at 15 and when you can see all other major countries like USA or UK or even China, Russia they have a lot more than as compared to us
so again same thing lot of headroom left for us to grow. If I am talking about Health Care Personnel India versus other countries, if I’m talking about Physicians per 10,000 population or be it nurses for 10,000 population again India is just at 7 and 18 as compared to someone like Us at 26 and 157. See if you want to be a superpower we have to also excel in all areas not only one right, going ahead with the total health care expenditure as a percentage of GDP India is only spending three percent as a percentage of
GDP on the health care expenditure and if you are talking about someone again like USA, USA is at 16.8 percent other forget USA what is the global average global average is also at 9.8 percent and India is only at three percent well right now if you have looked at the industry analysis you will find that yes there is a lot of penetrations which is still left in India in this entire sector but one very interesting point which we have to understand here is that the NCDs or the non-communicable diseases, the percentage of such type of
diseases is increasing at a rapid rate the total contribution of NCDs to the disease profile Rose from 30 percent in 1990 to 55 percent in 2016. You might be like what is this NCD or a non-communicable disease? This is more like a lifestyle related disease so bad lifestyle is going to lead to more and more NCDs. If I am talking about a communicable disease an example can be something like TB and a percentage of such kind of diseases is decreasing okay, now if I’m talking about total deaths as of 2016, 62 percent of the deaths
were because of NCDs or the non-communicable diseases, well though this point is not good for any country rising number of deaths due to NCDs but for companies like this their patients are going to be majorly from this category of NCDs and if you visualize this that if the people’s lifestyle is going to go from good to bad and from bad to worse the businesses of such hospitals is going to be on a rise. Moving ahead with the financials of the company the revenue or the top line of the company grew at a CAGR of almost
20 percent from financial year 2020 to financial year 2022 but PAT or the bottom line grew at 132 percentage, now what could be the reason for this extraordinary growth in profit? There could be two possibilities, possibility number one they are able to control their expenses or possibility number two like I said in the beginning because they have a good pricing power that is where their revenues can grow at a higher rate as compared to the rate at which the expenses are increasing so second possibility of understood what about the first possibility just to give you
some stats on that in financial year 2020 96 percentage was the percentage of expenses as compared to the revenue so if 100 was the revenue 96 was the cost to the company but if I am talking about 2022 as a percentage of revenue the expenses have dropped to 87 percent so I hope you have understood if the expenses are dropping from 96 percent 287 percent of course as a percentage of sale then obviously the profitability of the company is going to go higher, the company also has a positive operating cash flow and also positive free
cash flows. Well now let’s try and understand about the valuation of this company Global Health Limited and for that I am going to compare it with the peers that is Apollo Hospitals Enterprises Limited Forties Healthcare Limited, Max Healthcare Institute Limited Narayana Hrudayalaya Ltd and of course I’m also going to talk about the average of all these four peers. Now first of all if I were to talk about the PE you can see that the average PE comes out to 51.93 but Global Health P comes to 43.24, if I were to directly jump to the Price
to NAV ratio, you can see that the average of all these peers is 7.46 but for Global Health it is at 5.26 even if I’m talking about Market Capital Revenue it’s at 5.50 the average of pairs and for Global Health it’s coming to 4.09 and finally EV/EBITDA is at 25.54 versus EV by EBITDA for Global at 20.11 but one point you can check out is that Global Health ask if I am talking about revenue and net profit see it’s very small as compared to something like Apollo or 40s for that matter in fact the fourth
one is Narayana Hrudayalaya at 37,000 million and uska almost half is around Global Health which is at 22,000. So because the company is comparatively smaller in size as far as the revenue and profitability is concerned that might be one of the reasons why their valuations are also comparatively lower as compared to the peers as well as the average so if you ask me my opinion I believe that this company seems to be fairly valued as far as all the parameters something like P, E, P,B, EBITDA whatever, we looked at right now. Well recently I came
across a good news article about one of its peers so I thought of communicating this to you as well this is about a business standard news article which was for Narayana hrudayalaya and this one came up on October 28 2022, well the headline says that narayana hrudayalaya hits record high on Healthy Outlook, stock surges nine percent now why why is this happening? so here you can see inside the article analysts believe that the hospitals are structurally well placed and the momentum is expected to continue in the QY FY 23 as well, in fact they have
also mentioned that overall one important lever for all these things can be about because of the incremental elective surgeries due to pent-up demand post Covid and post Covid complications and higher International patients mix so all in all what happened during the Covid was that all these surgeries many patients also postponed and post covid a lot of complexities also took place because of which there is a lot of demand in such hospitals, by the way if I’m talking about Narayana Hrudayalaya this would also cater to a lot of NCD category of patients and I think same
logic I would want to apply for Global Health as well so with this you can understand that whatever news we read for Global Health can be a for Narayana Hrudayalaya, we can also apply for global Health. Moving ahead with some key positives and negatives about the company, the company focuses more on underserved areas with dense population and presence in top or capital cities of large states something like NCR or Lucknow, Patna and so on, the company also has large scale hospitals with sophisticated infrastructure and they also have experienced senior management team with institutional shareholder support.
Now if I go on to the negatives of the company there are 18 criminal proceedings against the company and its directors its promoters which involves an amount of almost 2,840 million one more important negative point I believe is that they have a high dependence on doctors nurses and other health care professionals or to understand having a high dependence on doctors and nurses and health care professionals that is not a negative what is the negative point the attrition rates for doctors is almost 31.43 percent in financial year 2022, for nurses it is 50.74 in financial year
2022 and others if I am talking about other health care professionals it’s 18.62 percent in 2022, so if I’m talking about doctors see doctors are going to be the main Personnel for any hospital and if the attrition rate is almost 30 percent it’s as good as one out of three doctors is leaving your hospital in one year I think this is where they have to definitely work on and if they are able to work on that that can be a good sign for the company. Going ahead with the objectives of the offer uh the first
first objective first of all it also has a split of OFS and fresh issues so what are they going to do with the fresh issue, number one they’re going to invest in two of their subsidies name of the subsidiary is GHPPL and MHPL and they’re going to invest in this subsidy in the either in the form of debt or in the form of equity for repayment or prepayment of borrowings of such subsidiaries right, second they can also use it for the General Corporate purposes when is the IPO going to start it’s going to start on
3rd of November 2022 will end on 7th of November 22 issue size is 2,205.57 crores and out of that as I mentioned here you can see there is a split of fresh issue and OFS. Lot size is 44 retail individual investors can apply for maximum 13 lots and price band offered is 319 to 336 per share. Well I hope you have understood all about Bikaji as well as Global but if you would ask me right now at this moment in time I’m little bit more inclined towards Global but finally I would also want to check
again as I mentioned overall subscription and also the GMP as on the last date of the IPO. So don’t forget to check out our live stream on 7th of November at 10.30 am wherein you will understand whether I would apply or not if you want to know more about how to analyze IPOs you can click here and if you want to know more about some interesting facts you can click here till then take care, Jai Hid and bye, bye. foreign
