What you must know about KK Shah Hospitals IPO?

KK Shah Hospitals Ltd, formerly known as Jeevan Parv Healthcare Ltd, was incorporated only in the year 2022. The hospital provides inpatient and outpatient healthcare services through its hospital in Ratlam, located in the state of Madhya Pradesh. The promoter of KK Shah Hospitals Ltd, Dr Kirti Shah, has been in medical practice since 1976. It was only in December 2022 that KK Shah Hospitals Ltd acquired Shah Maternity and Nursing Home, through a Business Transfer Agreement (BTA).  The KK Shah Hospital in Ratlam has over 26 beds for in-patient and out-patient treatment and is equipped with most of the modern diagnostic devices like CT scans, DEXA scans, BMD, sonography, and X-ray machines.

KK Shah Hospitals Ltd has, on an average, conducted over 75-80 surgeries per month. These predominantly include surgeries in the field of orthopaedics, gynaecology, general surgery, 10 dental and others. On an average, KK Shah Hospitals Ltd provides in-patient and out-patient care to over 2,300 patients per month, predominantly outpatients. Its bed occupancy ratio stands at around 27.67% with average IPD of 7.19 patients per day. These numbers pertain to the month of December 2022. KK Hospitals Ltd is already certified by the National Accreditation Board for Hospitals and Healthcare Providers (NABH Accredited) as a primary-level small healthcare organization in the state of Madhya Pradesh.

Key terms of the KK Shah Hospitals IPO SME

Here are some of the highlights of the KK Shah Hospitals IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 27th October 2023 and closes for subscription on 31st October 2023; both days inclusive.
   
• The stock of KK Shah Hospitals Ltd has a face value of ₹10 per share and it is a fixed price issue. The issue price for the IPO has been fixed at ₹45 per share. Being a fixed price issue, there is no question of price discovery post the IPO, since price is already decided.
   
• The IPO of KK Shah Hospitals Ltd has only a fresh issue component with no book built portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh portion of the IPO, KK Shah Hospitals Ltd will issue a total of 19,50,000 shares (19.50 lakhs), which at the fixed IPO price of ₹45 per share aggregates to a total fresh fund raising of ₹8.78 crore.
   
• Since there is no offer for sale portion, the size of the fresh issue will also be the total size of the IPO. Hence the total IPO size will also comprise of 19,50,000 shares, which at the fixed IPO price of ₹45 per share will aggregate to ₹8.78 crore.
   
• Like every SME IPO, this issue also has a market making portion with an allocation of 1,02,000 shares. The market maker for the issue is Rikhav Securities Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Dr Amit Shah and Dr Kirti Kumar Shah. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares and the OFS, the promoter equity holding share will reduce to 71.36%.
   
• The fresh issue funds will be used by the company for purchase of medical equipment and for general corporate purposes. Part of the monies raised will also go towards meeting the expenses of the public issue.
   
• Fedex Securities Private Ltd and Shreni Shares Private Ltd will be the lead managers to the issue and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Rikhav Securities Ltd.

IPO allocation and minimum lot size for investment

The company has allocated 5.23% of the issue size for the market makers to the issue, Rikhav Securities Ltd. The net offer (net of market maker allocation) will be divided equally between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of KK Shah Hospitals Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹135,000 (3,000 x ₹45 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 6,000 shares and having a minimum lot value of ₹270,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the KK Shah Hospitals IPO (SME)

The SME IPO of KK Shah Hospitals IPO opens on Friday, October 27th, 2023 and closes on Tuesday, October 31st, 2023. The KK Shah Hospitals Ltd IPO bid date is from October 27th, 2023 10.00 AM to October 31st, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is October 31st, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of KK Shah Hospitals Ltd

The company, in its draft prospectus, has only provided one year data. While that is understandable considering that the company was formed only in 2022, it does not give much scope for financial analysis or for a comparison with the previous year data. In the limited data that the company has disclosed for the latest year, the company has reported net profits of ₹0.16 crore on top line revenues of ₹5.35 crore. That is a net margin of around 3%, but as we mentioned earlier, the data is insufficient to take a measured view.

Investors getting into the IPO must look it as a play on the healthcare sector in the central India region since there is not enough of financials available. It remains a high risk call for IPO investors.