IPO Review - Healthcare Global Enterprises
Healthcare Global Enterprise (HCG) is a provider of specialty healthcare in India, focused on cancer and fertility. Under the HCG brand, the company operates the largest private cancer care network with a pan-India presence. HCG network consists of 18 cancer centres across India, including 14 comprehensive cancer centres, three freestanding diagnostic centres and a day care chemotherapy centre. In 2013, the company entered the fertility segment by acquiring 50.1% stake in BACC Healthcare, which operates four fertility centres under the Milann brand in Bangalore. HCG also operates two multi-speciality hospitals in Gujarat.
Cancer prevalence, incidences in India
The prevalence of cancer in India is ~3.9 million people in 2015, with 1.1 million reported new cancer cases in 2015. However, the real incidence of cancer could be 1.5-2x the reported incidence (1.6-2.2 million new cancer cases) in 2015. The prevalence of cancer in India is expected to increase to ~7.1 million people (~2.1 million new cases annually) by 2020 (Source: Ernst & Young) mainly due to demographic changes, increased exposure to risk factors like tobacco and alcohol consumption, growing awareness and increasing demand for medical tourism.
Existing demand-supply gap in diagnosis, treatment
Despite high demand for comprehensive cancer care centres, India has only 200-250 comprehensive cancer centres, which represents just one per 6 million people. Also, ~40% of these centres are located in eight metropolitan cities. In addition, there is a significant shortage of oncologists in India (one oncologist per 1,600 cancer patients). Due to the limited access to cancer care in India and inability of significant sections of the population to pay for quality care, only around 15-20% of cancer patients are currently able to undergo radiation treatment in India, as compared to a potential clinical need of 40-50% of cancer patients.
Sustainable business model in fast growing segments
HCG operates the largest private cancer care network across India. The HCG network consists of 18 comprehensive cancer centres. Each cancer centre offers comprehensive cancer diagnosis and treatment services (including radiation, medical oncology and surgical treatments). HCG network operates on a hub-and-spoke model, wherein its HCG centre of excellence in Bengaluru serves as a hub to other cancer centres. This network operates with a strong pool of 400 specialist physicians including 219 oncologists, 23 radiologists, 16 pathologists and 142 other specialist in its HCG network. These specialist physicians adopt a technology-focused approach to diagnosis and treatment. Apart from this, acquisition of the fertility business is an add-on driver for HCG over the long term.
Priced at 3.6-3.8x on FY15 sales of Rs. 519.4 crore
At the IPO price band of Rs. 205-218, the stock is available at 3.6-3.8x of FY15 sales of Rs. 519.4 crore. The asking price is in sync with recent deals in the healthcare segment. We recommend that investors SUBSCRIBE to the issue as it is a sustainable business model with good visibility.