Medi Assist Healthcare Services: Key management takeaways ahead of IPO

CNBC TV18

By Priyanka Deshpande

Published Jan 10, 2024

Medi Assist Healthcare Services, a third-party administration services to insurance companies, has set the price band for its initial public offering (IPO) at ₹397-418 per equity share.

The IPO is worth up to ₹1,171.58 crore and will open on January 15. Here’s are some key management takeaways ahead of the IPO.

The company was incubated by a former Infosys founder NS Raghavan, which was later acquired by Anil Ambani’s Reliance Health.

History of Medi Assist

Bessemer Health Capital and Vikramjeet Chhatwal via management coup took over the reins of the company

History of Medi Assist

Company generates revenue solely from insurance companies, earning a yield/fee of 3.5-5.5% on the gross premium it manages.

How does Medi Assist earn money?

Yield (fee charged as a % of premium managed) has been stable despite competition.

How does Medi Assist earn money?

The company has grown faster than the industry & there is no reason to believe historical growth rates will not continue as long as the industry keeps growing.

Financials of Medi Assist

Company’s EBITDA margins of ~23% are higher than the industry margins of low double digit.

Financials of Medi Assist

Company has historically seen ~25% growth rate with stable margins (~23%)

Financials of Medi Assist

Margins aided by focus on Tech and 94% annual retention rate with clients.

Financials of Medi Assist

Promoter stake to come from 77% to 40% post the OFS.

Why is Medi Assist doing an OFS, and not fresh issue?

No need to raise fresh money via the IPO as the company is profitable and is cash generating. Cash on the books at ₹145 crore as of September 30th.

Why is Medi Assist doing an OFS, and not fresh issue?

Company has funded all its acquisitions via internal cash generation. 90-95% of the EBITDA gets converted to free cash flow.

Why is Medi Assist doing an OFS, and not fresh issue?

The company, with 7 acquisitions in the last 8 years, anticipates that the low margins of acquired companies Raksha and Medvantage will not negatively impact consolidated margins.

M&A

No M&A opportunities at the moment, but the company is opportunistic.

M&A

The company is not concerned about the high dependence on top 5 clients; their contribution to revenue is approximately 71% as of September 2023, down from 78% in FY23.

Is high dependence on 5 clients a concern?

Thanks For Reading!

Medi Assist Healthcare Services IPO price band fixed at ₹397-418 per share