Abstract

The case is about the IPO of corporate healthcare group Krishna Institute of Medical Sciences (KIMS) Hospitals, based in Hyderabad, India. KIMS is one of the largest corporate healthcare service providers in the southern Indian states of Andhra Pradesh and Telangana in terms of the number of patients treated and treatments offered. The hospital chain provides multi-disciplinary healthcare services in Tier 1, 2, and 3 cities of the two states. As of 2021, it operated 9 multi-specialty hospitals under the ‘KIMS Hospitals’ brand and offered a comprehensive range of healthcare services across 25 specialties and super specialties. The affordable and quality healthcare services provided by KIMS and its track record of maintaining a good relationship with medical professionals has enabled it to grow rapidly and build ‘KIMS Hospital’ as a strong brand in the Indian healthcare industry. On June 16, 2021, KIMS opened its public issue to raise Rs.21.44 billion from retail, qualified institutional buyers, and non-institutional investors. The face value of each share was Rs.10, and the price band for the offer was fixed at Rs.815 to Rs.825 per equity share. The IPO comprised the fresh issue and the offer for sale shares. The company intended to use the proceeds of the IPO for repayment/prepayment of certain borrowings and to meet the expenses related to general corporate purposes. On the last day of the issue (June 18, 2021), the IPO was oversubscribed 3.86 times and the company received 55.6 million bids for 14.4 million shares on the offer. KIMS has consistently maintained its strong financial performance by increasing patient volumes, cost efficiency, and building diversified revenue streams across medical specialties. With its advantage of regional dominance and operational efficiency, KIMS has demonstrated one of the best financial performances among hospitals in India. Looking at the company’s strong brand value, quality, and affordable healthcare services, diversified revenue sources, and reasonable valuation compared to peers, the KIMS IPO looked pretty attractive.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the need for public issues in the healthcare sector
• Highlight the features of the KIMS IPO
• Evaluate the key strengths and weaknesses of KIMS Hospitals
• Discuss whether or not to invest in KIMS IPO

Keywords

Healthcare sector; Initial Public Offer; Shareholders; Equity share capital; Offer for sale; Brand value; Organic growth; Inorganic growth; Strategic acquisition; Anchor book; Anchor investors; Market value; Book running lead managers; Qualified Institutional Buyers (QIB); Non Institutional Investors (NII)