New Investment Opportunity in US Healthcare Sector Provider: Key Insights and Financial Growth
Sagility India is preparing for its maiden public offering, which will open on November 5, 2024, and closes on November 7, 2024. The company is raising around ₹2,107 crore by an all-of-sale structure. It has fixed the price band at ₹28 to ₹30 per share, with a lot size of 500 shares, and a minimum investment of ₹15,000 to subscribe to the offer.
Company Information
Sagility India Ltd. (SIL) provides technology-enabled business solutions to the US healthcare sector. As a dedicated provider of healthcare services, it also serves clients, which may include payers such as US health insurance companies as well as providers, for example, hospitals and medical device companies.
SIL services for payers include core operations: claims management, enrollment, benefits planning, premium billing, and provider data management, as well as clinical operations such as utilization and care management. For providers, it offers revenue cycle management services: financial clearance, medical coding, billing, and accounts receivable follow-up.
Issue Details:
The company had its first IPO; this was a secondary offering where 702,199,262 equity shares were sold for Rs. 10 a share, whereas at the upper price cap of Rs. 28–Rs. 30 per share, Rs. 2,106.60 crore was anticipated.
The IPO was made available for subscription from 5 November 2024 to 7 November 2024, while the minimum application was 500 shares. It was a 100% Offer for Sale as no money was anticipated to be raised for the firm but was designed to realize value and listing benefits.
The company kept 1,900,000 shares aside for eligible employees at a discount of Rs. 2. The minimum was at 75% QIBs, up to 15% HNIs, and 10% retail investors.
The joint Book Running Lead Managers were ICICI Securities, IIFL Securities, Jefferies India, and J.P. Morgan India, and Link Intime was the registrar. The equity capital of the company remained at Rs. 4,681.33 crore, and its market cap was Rs. 14,043.99 crore.
Financial Performance
Sagility has demonstrated wonderful financial growth in the past three fiscal years. As of FY22, the Company had achieved a total income of Rs. 944.39 Cr with a net loss of Rs. 4.67 Cr. However, in FY23, income increased exponentially to Rs. 4,236.06 Cr with a net profit of Rs.143.57 Cr.
This positive trend continued to FY24, when its income stood at Rs. 4,781.50 crore and net profit at Rs. 228.27 crore. In Q1FY25, which ends on June 30, 2024, Sagility recorded an income of Rs 1,247.76 crores and a net profit of Rs 22.29 crore; however, its healthy performance usually comes during the latter half of every fiscal year.
Over the last three years, Sagility’s EPS has been at Rs 0.37. Net worth RoNW was reported to be 2.52%. The IPO pricing provides a P/BV multiple of 1.85 for the company, with NAV standing at Rs 16.25 as of 30 June.
IPO Price offers a P/E rating of 157.89 (annualized FY25 and) 61.22 with FY24 earnings). PAT margins improved consistently; while the profit after tax came in at 7.17% for FY22, 10.80% for FY23, and 12.40% for FY24, that of Q1 FY25 was 11.83%.
Stake Sellers
Of the nine investors, the biggest buyer was 360 ONE through Special Opportunities Fund – Series 8 and Monopolistic Market Intermediaries Fund. It acquired a 1.07% stake in the company for ₹150 crore.
The second largest buyer was Avendus Future Leaders Fund II, with a 0.9% stake for ₹126 crore. According to media reports, Adani Properties, the real estate arm of the Adani Group, also acquired 0.14% of shares for ₹20 crore.
Other investors include Elpro International, Jasub Property Holdings, Jaya Chandrakant Gogri, and Rashesh Chandrakant Gogri. And, in total, PAM Family Trust, Shradha Family Trust, Unmaj Ventures, and Uma Priyadarshini Kollareddy and Kollareddy Ranganayakamma will have 0.5% equity each worth ₹70 cr.
Market Position and Growth Prospects
Sagility India is well-positioned in the healthcare services segment by harnessing technology and analytics to meet the growing needs for efficient healthcare solutions for the US market. The company has ambitions to expand its service offering further into advanced data analytics and AI-driven solutions, besides considering acquisition opportunities to beef up its capabilities.
IPO Proceeds Uses
Even though the IPO is an offer-for-sale where fresh issue proceeds are not directly available to Sagility India, the proceeds would accrue to existing shareholders selling their stakes. The pre-sale of pre-IPO stakes will enhance investor sentiments and can be used subsequently for future growth opportunities.
Risks and Considerations to Keep in Mind
There are certain risks that investors need to consider while investing in Sagility.
Major Competition: Sagility is vulnerable to major competition, which can impact its business performance and profitability.
Limited Focus: The company’s single focus on the US healthcare industry places it at risk of resulting in industry-specific risks.
Share Pricing: Share issues were done at ₹28.30 which is at lower levels to the offer price.
Goodwill Dependency: Goodwill of 54.67% of total assets was reported by Sagility in the year 2024, which indicates a significant dependency on intangible assets.
Credit Rating Issues: A downgrade in the credit rating of Sagility would keep it away from capital for further use.
High Attrition Rate: At a 27.34% attrition rate, the company may be facing more cost liabilities associated with the attraction and retention of staff at work.
Conclusion
Sagility India Ltd. is all set to come up with its initial public offering from November 5 to November 7, 2024. The offer-for-sale is intended to raise around ₹2,107 crore.
The IPO is attractively pitched for retail investors with a price band of ₹28 to ₹30 per share, along with the option of investing in a minimum lot of 500 shares. This IPO neither raises fresh capital for Sagility but unlocks value for the existing shareholders and secures listing benefits in the market.
Sagility’s financial performance has greatly improved, with steady revenues in the last three fiscal years. Although its P/E ratios reveal the aggressive pricing of the firm, the company is well positioned for the growing US market demand in healthcare solutions. However, potential investors should be on the lookout for possible risks: competition and a high reliance on goodwill.
