Rainbow Children’s Medicare IPO

SUBSCRIBE to Rainbow Children’s Medicare IPO

Rainbow Children’s Medicare IPO Details

Rainbow Children’s Medicare Limited IPO
To be updated

WHY SUBSCRIBE TO Rainbow Children’s Medicare Ltd IPO

Rainbow Children’s Medicare Limited is a leading multi-specialty pediatric and obstetrics and gynecology hospital chain in India, operating 14 hospitals and three clinics in six cities, with a total bed capacity of 1,500 beds, as of December 31, 2021. According to the CRISIL Report (which was commissioned and paid for by the Company in relation to the Offer), the company had the highest number of hospital beds amongst comparable players in the maternity and pediatric healthcare delivery sector, as of March 31, 2021. Its core specialties are pediatrics, which includes newborn and pediatric intensive care, pediatric multi-specialty services, pediatric quaternary care (including multi organ transplants); and obstetrics and gynecology, which includes normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetic and fertility care. The company has established its reputation as a leader in multi-specialty pediatric services, with strong clinical expertise in managing complex diseases. The company has also expanded its operations to include obstetrics and gynecology services, whereby they offer comprehensive perinatal services to patients.

Objects of the Offer :

The Offer comprises of a Fresh Issue and an offer for sale. The Fresh Issue aggregates up to ₹2,800 million, while the offer for sale is of 24,000,900 equity shares. Out of the net proceeds from the fresh issue, ₹400 million would be used for Early redemption of NCDs issued by the Company to CDC Emerging Markets Limited (“CDCEML”) in full, while ₹1,700 million would be used for Capital expenditure towards setting up of new hospitals and purchase of medical equipment for such new hospitals and the balance would be utilized towards general corporate purposes.

Rainbow Children’s Medicare ltd IPO ANALYSIS

Consistent track record of financial performance:

The company’s revenue from operations has increased from ₹5,427.92 million in Fiscal 2019 to ₹6,500.47 million in Fiscal 2021. The company’s EBITDA increased from ₹1,568.66 million Fiscal 2019 to ₹1,730.97 million in Fiscal 2021 while PAT decreased from ₹445.90 million in Fiscal 2019 to ₹395.68 million in Fiscal 2021. However, the 9 Month Ending December 2021 PAT has risen to ₹1,264.13 million.

CONSOLIDATED FINANCIAL SUMMAry of Rainbow Children’s Medicare

(`₹ in Millions) FY19 FY20 FY21 9M ended Dec 2020 9M ended Dec 2021
Revenue from Operations 5,427.92 7,193.91 6,500.47 4,861.71 7,613.11
EBITDA 1,568.66 2,073.73 1,730.97 1,386.65 2,694.93
PAT 445.90 553.40 395.68 385.25 1,264.13
EPS (₹) 4.83 5.98 4.36 4.22* 13.39*
ROE 12.01% 13.68% 8.88% 8.68% 21.45%
Shareholding (%) Pre IPO
Promoter and Promoter Group 62.19%
Public 37.81%
Share Reservation Net Issue (%)
QIB 50
NII 15
Retail 35
Company Leadership
Dr. Ramesh Kancharla Chairman and Managing Director
Dr. Dinesh Kumar Chirla Whole-Time Director
R Gowrisankar CFO
Issue Managers
BRLMs Kotak Mahindra Capital Company Limited, J.P. Morgan India Private Limited, IIFL Securities Limited
Registrar Kfin Technologies Private Limited
Issue Details
Face Value ₹ 10
Price Band
Issue Size ₹ crores
Bid lot Equity Shares
Lot size shares
Issue Type 100% Book building

Competitive Strength:

Ability to conceptualize, create and operate specialized children’s hospitals

Rainbow Children’s Medicare Limited specialization in pediatric care and the ability to conceptualize, create and operate children’s hospitals are critical to its success. The company allocates a significant proportion of its capital expenditure towards the interiors of its hospitals in order to make the environment congenial for children. One of the biggest differentiators of its hospital from adult hospitals is the children centric atmosphere. Its children’s hospitals are made vibrant and visually appealing, with bright and congenial interior decoration. Each of its hospitals also has a designated child play area and other entertainment in the patient rooms which comforts the children recovering from treatment. Further, a children’s hospital requires focus on psychological and emotional care, which is different from adult hospitals, and it keep this understanding at the forefront while treating children. The company has realized that keeping the children centric atmosphere in its hospitals has been one of the biggest differentiators and a key factor of its success.

Leading pediatric multi-specialty healthcare chain with strong clinical expertise in managing complex diseases

Rainbow Children’s Medicare Limited is one of India’s largest multi-specialty pediatric care providers (based on hospital beds, as of March 31, 2021), with a presence across various specialties such as neurology, nephrology, gastroenterology, oncology and cardiology. The company has built a comprehensive pediatric critical care program and have consistently allocated approximately one-third of its operational beds at all its hospitals to critical care. In addition, the company has established advanced neonatal and pediatric intensive care services across its hospitals. It provides complex multi-specialty tertiary intensive care at its hub hospitals, which provides the company with a significant competitive advantage. According to the CRISIL Report it is classified as a standalone pediatric multi-specialty hospital chain and one of the few pediatric focused hospital chains in south India.

Comprehensive perinatal care provider, with synergies between pediatric and obstetrics and gynecology services

As its pediatric operations grew, Rainbow Children’s Medicare Limited realized that many pregnancies require deliveries in a comprehensive perinatal ecosystem, to address incidents of high-risk pregnancies, babies requiring immediate surgical interventions and other neonatal interventions right after birth. As a result, the company leveraged its Rainbow brand, which was already well recognized in pediatrics, to expand into obstetrics and gynecology in 2007 and offer comprehensive perinatal services. The company’s ability to offer integrated pediatric, along with its obstetric and gynecologic services, enables it to provide very effective and cost-efficient one-stop healthcare solutions to families. The company believes this is largely attributable to the synergies between its pediatric care and its obstetrics and gynecology services. The company’s perinatology division (covering maternal medicine, obstetrics, fertility, fetal medicine and neonatology) has worked cohesively over the years to optimize outcomes in many high-risk pregnancies such as multiple pregnancies, extreme prematurity, surgically correctible fetal anomalies and growth restrictions. This robust model of care has made a huge positive impact on outcomes for its patients.

Hub-and-spoke model that provides synergies and ensures better care and access for patients

Rainbow Children’s Medicare Limited has successfully executed a hub-and-spoke model at Hyderabad, Telangana with its Banjara Hills hospital (comprising 250 beds) being the hub that is complemented by four spokes at four locations in Hyderabad, Telangana namely Secunderabad, LB Nagar, Kondapur and Hydernagar. At its hub hospital, the company provides comprehensive outpatient and inpatient care with a focus on tertiary and quaternary care and, at its spokes, it provides secondary care in pediatric, obstetrics and gynecology and emergency services. Under this model, its superspecialty doctors based at its hub hospital are able to reach out to the larger community and cover a larger catchment area. This model has enabled Rainbow Children’s Medicare Limited to evolve over the past two decades from a single secondary care hospital in Hyderabad, Telangana to six hospitals in the city and as an established provider of tertiary and quaternary care services at its hub hospitals

Proven ability to attract, train and retain high-caliber medical professionals

According to the CRISIL Report (which was commissioned and paid for by the Company in relation to the Offer), the pediatric healthcare market in India faces challenges in relation to sourcing and retaining quality pediatric doctors. Hence, Rainbow Children’s Medicare Limited’s ability to attract, train and retain seasoned doctors and other medical professionals has been a significant contributor to its growth and is critical to its future business prospects. Over the years, the company has been able to attract and retain high quality medical professionals by offering them challenging and rewarding career options and growth trajectories. Its established reputation, professional approach, sound training systems and appealing career development opportunities are attractive to medical professionals. The company follows a doctor engagement model whereby most of its core specialists work exclusively at its hospitals on a full-time retainer basis. This model ensures that most of the core specialists are available 24/7 on a roster basis across its hospitals, which is particularly important for children’s emergency and neonatal and pediatric intensive care services. The company enters into retainership contracts with its newly hired doctors covering the initial two to three year periods, which provides them with stability and makes it a desirable workplace. The company has successfully adopted the doctor engagement model across its hospitals, which has led to a high degree of full-time doctor retention (at 81% for the period from April 1, 2019 to March 31, 2021).

Management:

  • Dr. Ramesh Kancharla (Chairman and Managing Director): He holds a Bachelor of Medicine and Bachelor of Surgery (“MBBS”) from Sri Venkateswara University and a Doctor in Medicine (“MD”) in paediatrics from Mangalore University. He is a member of the Royal Colleges of Physicians of the United Kingdom. He has over 23 years of experience with the Company. Prior to setting up the Company, he was associated with King’s College Hospital, where he completed his specialist training in paediatric gastroenterology, hepatology and nutrition.

  • Dr. Dinesh Kumar Chirla ( Whole-time Director): He holds a MBBS degree from Marathwada University, Doctor of Medicine in paediatrics from Dr. Babasaheb Ambedkar Marathwada University, Doctor of Medicine in Neonatology from the University of Mumbai. He is a member of the Royal College of Paediatrics and Child Health, London. He is on the Specialist Register in Neonatology at the Specialist Training Authority of the Medical Royal Colleges, London and was a fellow in Neonatology at Mercy Hospital for Women. He has over 18 years of experience in the healthcare industry.

  • R Gowrisankar (CFO): He holds a bachelor’s degree in commerce from Bharathidasan University and a master’s degree in commerce from Alagappa University. He is a fellow member of the Institute of Chartered Accountants of India. He has been associated with the Company for over seven years. He has over 21 years of professional experience.

Risks:

  • Its revenues are highly dependent on its hospitals in Hyderabad and Bengaluru. It is also significantly dependent on certain specialties for a majority of its revenues. Any impact on the revenues from these hospitals or specialties could materially affect its business.

  • The company operates in a regulated industry, and compliance with applicable safety, health, environmental, labor and other regulations, or failure to obtain or renew approvals, licenses, registrations and permits, may adversely affect its business.

  • Failure to maintain and enhance its brand and reputation, and any negative publicity and allegations in the media against it, may materially and adversely affect the level of market recognition of, and trust in, its services, which could result in a material adverse impact on its business.

  • If the company is unable to maintain bed occupancy rates at sufficient levels, it may not be able to generate adequate returns on its capital investments, which could materially and adversely affect its revenue and profitability.

  • The company could be exposed to risks relating to the handling of personal information, including medical data.

  • Its insurance coverage may not adequately protect its and this may have an adverse effect on its business.

  • The company faces intense competition from other healthcare service providers. If it is unable to compete effectively, its business, results of operations and cash flows may be materially and adversely affected.

  • * For complete list of risk factors kindly refer to the Red Herring Prospectus

Strategies going forward:

Strengthen tertiary and quaternary pediatric services in its existing hospitals

Based on its 22 years of experience in operating pediatric hospitals providing tertiary newborn, pediatric intensive and pediatric sub specialty care, there is great opportunity for its to expand its quaternary care operations. The company plans to build similar capabilities in its hospitals in Bengaluru, Karnataka, Chennai, Tamil Nadu and New Delhi- NCR. Further, Rainbow Children’s Heart Institute is a 110-bed standalone pediatric cardiac center that treats children’s cardiac problems. The company plans to develop similar cardiac capabilities in Bengaluru, Karnataka, Chennai, Tamil Nadu and New Delhi-NCR, by hiring reputed, experienced and skilled cardiac specialists in these cities. It also plans to invest in specialized medical infrastructure such as cath labs, pediatric cardiac OT and echocardiogram machines, which will enhance its capabilities in treating cardiac patients

Further grow its comprehensive perinatal services offered under “Birthright by Rainbow”

“Birthright by Rainbow” seeks to be proactive not only in providing safe birthing but also in creating memorable birthing experiences, and has introduced child birth preparation classes with a focus on nutrition, lactation and yoga. The growth of Rainbow Children’s Medicare Limited’s perinatal services has been driven by the early establishment of such practices. The company is in the process of further strengthening its connect with its patients by forming pregnancy support groups and developing an interactive Birthright mobile application. Going forward, the company is focused on providing comprehensive obstetrics and gynecology services at all its current and future hospitals, which will help the company in enhancing its patient and revenue base. The company also plans to increase its focus on training and increase its intake of DNB and fellowship programs in obstetrics and fetal medicine. This would increase its pool of middle grade doctors specializing in obstetrics and gynecology. The company further plans to expand its service offering by introducing concepts such as trained midwifery in its hospitals.

Grow its presence through hub and spoke networks across key geographic clusters and new locations

Rainbow Children’s Medicare Limited has successfully created a hub and spoke model in Hyderabad, Telangana through its network of a hub hospital in Banjara Hills, Hyderabad, Telangana supported by four spokes spread across the city. This model provides patients access to multidisciplinary level 4 neonatal and pediatric intensive care and pediatric subspecialty care at the hub hospital while at the same time providing access to 24/7 emergency, pediatric secondary and tertiary care and full spectrum of obstetrics and gynecology closer to home at the spokes. The company believe that the model is financially optimal, as spokes are set up at lower cost. The company plans to replicate this model across key cities and regions in the country. In particular, the company plans to add additional spokes at Hyderabad, Telangana Bengaluru, Karnataka, New DelhiNCR and Chennai, Tamil Nadu. It also plans to increase the capacity of its hubs in New Delhi-NCR and Bengaluru, Karnataka. Further, the company also exploring options to grow organically in newer locations in Andhra Pradesh and Tamil Nadu. In addition, it is also exploring opportunities to expand in north east India and in neighboring countries. From time to time, it will also consider inorganic growth opportunities.

Initiatives to drive performance efficiencies

Rainbow Children’s Medicare Limited will continue to explore means to enhance performance efficiencies to reduce the cost of healthcare delivery so as to make it affordable for patients, and also contribute to the growth in its profitability. In this regard, it seeks to streamline its procurement processes by focusing on (a) centralized and standardized procurement of medical equipment, consumables and pharmaceuticals; (b) leveraging the scale of its operations for more economical sourcing; and (c) using technology to have real time visibility, assess supplier performance and access other relevant information. The company also plan to further reduce the length of hospital stays as its surgical work is trending towards minimally invasive surgeries, which it believes will have a beneficial impact on its key operational parameters.

Digital healthcare initiatives to address patient convenience, operational efficiencies and expand reach

Rainbow Children’s Medicare Limited’s digital strategy is focused on enabling its to provide customized healthcare services for its target customers as well as to digitize processes to significantly improve the in-hospital customer experience. As the company operates in children and women care, its customers include young independent professionals who are technology savvy and it believe it has the opportunity to build a deep lasting relationship with such customers spanning from conception to adolescence using digital initiatives. The company’s “Rainbow Children’s Hospital” mobile application is one of the core aspects of its digital strategy. The application enables patients to book appointments, make payments, order drugs for home delivery, download investigation reports and receive alerts on essential services. It is in the process of implementing an AI-enabled content management engine to support the application, which will be able to process large amounts of patient data to provide it with insight into patient needs. The company also plan to increase the scale of its reach to patients through its digital ecosystem.

Disclaimer -

The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by Rainbow Children’s Medicare Limited. The final content could change based on the Red Herring Prospectus (RHP) filed

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