Rainbow Children Medicare Ltd IPO : 7 things to know

Rainbow Children Medicare Ltd, a multi-specialty paediatric, gynaecological and obstetrics hospital chain, had filed its draft red herring prospectus (DRHP) in late December 2021 and SEBI is yet to give its observations and approval for the IPO.

Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has. It is expected to be approved by March or by the first week of April next fiscal.

The IPO of Rainbow Children Medicare Ltd will be a combination of a fresh issue and an offer for sale and the next steps in the IPO process will be commenced once the approval from SEBI is received.

7 interesting facts to know about the Rainbow Children Medicare Ltd IPO

1) Rainbow Children Medicare Ltd has filed for an IPO with SEBI which comprises of a fresh issue of Rs.280 crore and an offer for sale of 240 lakh shares. However, since the price band for the proposed IPO has not been announced still (which is subject to the final approval of SEBI), the size of the fresh issue / IPO / offer for sale is not precisely know.

The company has for now only disclosed in the draft red herring prospectus that the total size of the issue would be in the vicinity of Rs.2,000 crore.

2) Let us talk about the offer for sale (OFS) portion of the Rainbow Children Medicare IPO first. A total of 240 lakh shares will be sold by the promoters and some of the early shareholders as part of the offer for sale. The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS.

However, the selling of stake by the promoter will increase the free float of the company and facilitate listing of the stock. Promoters Ramesh Kancharla, Dinesh Kumar Chirla and Adarsh Kancharla will participate in the OFS. In addition, among the early investors, CDC Group and CDC India will also participate in the offer for sale.

3) The fresh issue portion of Rs.280 crore will not only be capital dilutive but also EPS dilutive for the company. The company, Rainbow Children Medicare, will use the funds raised via the fresh issue for early redemption of the non-convertible debentures (NCD).

In addition, part of the fresh issue proceeds will also be utilized for the proposed capital expenditure of the healthcare business which will encompass, among other things, setting up of new hospitals and the purchase of medical equipment for these hospitals. Part of the fresh proceeds will also be utilized for general corporate purposes.
 

4) Rainbow Children’s Medicare started its operations in Hyderabad and currently operates 14 hospitals and three clinics which are spread across 6 Indian cities. The group currently has a total bed capacity of 1,500 beds, as of September 2021.

Rainbow group had the highest number of hospital beds among comparable players if looked at from the perspective of their total franchise in the maternity and paediatric healthcare delivery sector. Rainbow has come a long way since its inception in Hyderabad more than 20 years ago.

5) For the fiscal year ended FY21, Rainbow Children Medicare had reported net profit at Rs.39.56 crore. This was lower than the FY20 profits but that was more due to various restrictions in a contact intensive sector.

The revenues for the FY21 full year stood at Rs.650 crore compared to Rs.719 crore in FY20. However, in FY22, if one looks at the six months to Sep-21, then revenues for the half year are already at Rs.513 crore while the net profits are also substantially in the first half at Rs.81.22 crore. Clearly, in the post pandemic situation, the growth traction appears to be back on track.

6) The core specialties of Rainbow Children Medicare include segments like paediatrics, gynaecology and obstetrics. Under Paediatrics, Rainbow covers new-born and paediatric intensive care, paediatric multi-specialty services and paediatric quaternary care.

This also includes multi organ transplants. In the obstetrics and gynaecology business, Rainbow covers normal and complex obstetric care, multi-disciplinary foetal care, perinatal genetic and fertility care etc. 

7) The IPO of Rainbow Children Medicare Ltd will be lead managed by Kotak Mahindra Capital, JP Morgan India and IIFL Securities. They will act as the book running lead managers or BRLMs to the issue. The stock will be listed on the BSE and the NSE.

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