Medi Assist Healthcare Services Ltd - IPO Note
Insurance
Medi Assist Healthcare Services Ltd - IPO Note
Insurance
Stock Info
Shareholding (Pre IPO)
Shareholding (Post IPO)
Company Description
Medi Assist is a Bengaluru-based health-tech and insure-tech company that administers health benefits to employers, retail members, and public health schemes. The company provides third-party administration services to insurance companies through its wholly owned subsidiaries, Medi Assist TPA, Advantage TPA, and Raksha TPA. A third-party administrator is an organization that processes health insurance claims for insurance companies and provides services such as policy administration, customer service, and network management.
As a third-party administrator, the company acts as a facilitator between Insurance companies and their policyholders, Insurance companies and healthcare providers (such as hospitals), and the Government and beneficiaries of public health schemes. The company also facilitates other healthcare and ancillary services such as hospitalization services, call center services, customer relations and contract management services, billing services, and claims processing services through the company and other Subsidiaries, IHMS, Mayfair India, Mayfair UK, Mayfair Group Holding, Mayfair Philippines, and Mayfair Singapore. The company has developed a pan-India healthcare provider network which comprises 18,754 hospitals across 1,069 cities and towns and 31 states (including union territories) in India and a network across 141 countries globally as of September 30, 2023.
Medi Assist TPA had a market share of 14.83% of the retail health insurance market and 41.71% of the group health insurance market, and a cumulative retail and group segment share of 33.67% serviced by third party administrators, as of Financial Year 2022. The company managed Rs.145,746.49 million of health insurance premiums (group and retail) at the end of financial year 2023 growing at a CAGR of 35.67% from Rs.79,184.93 at the end of Financial Year 2021. As of September 30, 2023, they work with 35 insurance companies in India and globally.
Competitive strengths
Well-established Third-Party Administrator in India
Medi Assist provides third-party administration services to insurance companies
through its wholly-owned subsidiaries, Medi Assist TPA, Advantage TPA, and Raksha
TPA. The company believes that a market-leading position as a third-party administrator
in India enhances the ability to benefit from the prospects of the health insurance
industry, enhances profitability, and strengthens value proposition due to increasing
economies of scale, ability to invest in cutting-edge technology and better scale
for negotiating with healthcare provider networks. The COVID-19 pandemic has brought
about a fundamental and lasting shift in behaviour across both the retail and group
segments. This shift has significantly driven substantial growth for several TPAs,
including Medi Assist over the past three Financial Years. With the company's
leading market position, technology-enabled ecosystem, longstanding relationships
with insurers, hospitals, and corporates, and pan-India presence, Medi Assist is
well-positioned to take advantage of this growth.
Established Relationships with a majority of Insurance companies
It interacts with a large number of participants in the health insurance ecosystem
and generates revenue predominantly from health and other general insurance companies.
The company has been successful in establishing trust and strengthening longstanding
relationships with insurance companies through leveraging the domain expertise of
the Indian health insurance ecosystem. Its average term with the four PSU companies
was 20 years and with 22 non-PSU sector insurance companies was 10 years. Its share
of retail and group benefits administration premiums under management from non-PSU
insurance has increased from 14.65% in FY21 to 21.26% in FY23.
Appealing agreements with a nationwide network of healthcare providers in India
It has developed a pan India healthcare network of 14,301 hospitals across 967 cities
and towns and 32 states in India as of March 31, 2023. It is a notable health benefits
administrator partner for several top hospital chains in India and across group
policies for private sector general insurers in India. For fiscal year 2023, it
contributed 12.45%, 6.4%, 5.21%, 4.7%, and 4.57% of the total healthcare services
revenue for five hospital chains in India.
Scalable Technology-enabled infrastructure addressing the needs of all in the
health insurance ecosystem
Its technological expertise will continue to be vital to the success and continued
growth of the company. Its ability to deliver significant value to all constituents
of the health insurance ecosystem is rooted in scalable technology platforms and
applications. Its technology infrastructure possesses the attributes of scalability,
customization, comprehensiveness, user-friendliness, and security. Its technology
ecosystem is based on a) Cost Leadership, b) Insurer benefits, c) Insured member
experience, and d) offering for healthcare providers.
Ability to integrate acquisition
It has a history of integrating acquisitions by consolidating its position in the
health insurance industry. Its track record of efficiently integrating acquired
business, realizing synergies, and consolidating its position in the market has
helped it to grow. Over the years it strategically acquired several businesses,
including the acquisition of DHS in October 2016, and the TPA business of Medicare
Insurance TPA Services (India) Private Limited in June 2018, to strengthen its presence.
Because of the robust operational infrastructure and technological ecosystem, it
possesses the ability to efficiently integrate the acquired business into its platform.
Further acquisition has broadened the service offerings, strengthened the technology
stack, and provided access to new geographies.
Key Risks & Concerns
Customer Concentration Risk
It derives a significant portion of its revenue from a limited number of clients.
For the Fiscal years 2021, 2022, and 2023, the five largest clients attributed 78.23%,
78.95%, and 77.97% of the total revenue from contracts with customers. In this case,
the loss of a large client or a decline in the amount of business could hurt the
business operations.
Service quality
Any failure to maintain the quality of the services such as quick turnaround time
in claims processing, responsiveness, accuracy, and effective grievance redressal
may negatively impact the brand reputation and adversely affect the business and
results of operations.
Declining premium under management
A decrease in Insurance companies outsourcing claims processing to third-party administrators
(TPAs) could impact MAHSL’s business. There is a risk of reduction in claims
due to market dynamics, regulatory changes, and economic conditions. IRDAI regulations
have the authority to engage or terminate TPA services, and any decline in claims
settled by TPAs can adversely affect the operations.
Competitive Market
The third-party administration industry is intensely competitive and any inability
to compete effectively can adversely affect the business and financial conditions.
Outlook and Valuation
Medi Assist Healthcare Services Limited is a well-established health-tech and insurance-tech company. It has scalable, technology-enabled infrastructure that addresses the needs of all constituents of the health insurance ecosystem. It has a diversified base of group accounts and a strong relationship with the majority of insurance companies. Medi Assist provides third-party administration services to insurance companies that process health insurance claims for insurance companies and provide services such as policy administration, customer service, and network management.
We believe that the company's market leading position as a third-party administrator in India enhances the ability to benefit from the prospects of the health insurance industry, enhances profitability, and strengthens value proposition due to increasing economies of scale, ability to invest in cutting-edge technology and better scale for negotiating with healthcare provider network. Medi Assist intends to pursue acquisition opportunities to expand existing service offerings, increase market share in existing markets, or expand to new geographies. Medi Assist also wants to pursue opportunities for carve-outs and alliances with insurance companies and focus on partnerships with employers and distributors.
MAHSL is catering to the fast-growing health insurance sector. Thus, considering its dominant share in the TPA market, consistent financial performance, healthy cash flow generation, and dividend payout, we assign a “SUBSCRIBE” rating for the issue. The issue is valued at 38.2X its FY23EPS, which appears reasonable.
Key Information
Use of Proceeds:
Object of the Issue: The total issue size is of Rs. 1171.58 crores
of which the entire issue is an Offer for Sale. The company aims to achieve the
benefit of listing the Equity shares on the stock exchanges.
Book running lead managers:
Axis Capital Limited, IIFL Securities Limited, Nuvama Wealth Management Limited,
and SBI Capital Markets Limited are the book-running lead managers for the IPO.
Management:
Dr. Vikram Jit Singh Chhatwal (Chairman and Whole-time Director), Satish V.N. Gidugu
(Wholetime Director and Chief Executive Officer), Vishal Vijay Gupta, Gaurav Sharma
(Non-Executive Nominee Director), Himani Kapadia, Gopalan Srinivasan, Anil Chanana,
Dr. Ritu Niraj Anand, Ananda Mukerji (Independent Director)
Financial Statement
Profit & Loss Statement:- (Consolidated)
| Particulars (Rs Crores) | FY21 | FY22 | FY23 |
|---|---|---|---|
| Revenue | 323.00 | 394.00 | 505.00 |
| Gross Profit | 323.00 | 394.00 | 505.00 |
| Employee Benefit Expense | 143.00 | 156.00 | 198.00 |
| Other Expense | 104.00 | 147.00 | 188.00 |
| EBITDA | 76.00 | 91.00 | 119.00 |
| EBITDA Margin | 23.00% | 23.00% | 24.00% |
| Depreciation & Amortization | 32.00 | 28.00 | 27.00 |
| EBIT | 44.00 | 63.00 | 93.00 |
| Finance Cost | 6.00 | 3.00 | 3.00 |
| Other Income | 23.00 | 18.00 | 14.00 |
| Exceptional item | 3.00 | ||
| EBT | 61.00 | 81.00 | 104.00 |
| Tax | 23.00 | 17.00 | 28.00 |
| Profit for the Year from continuing operations | 38.00 | 63.00 | 75.00 |
| Profit/ Loss from discontinued Operations | -12.00 | 1.00 | -1.00 |
| Profit for the Year | 26.00 | 64.00 | 74.00 |
| PAT Margin | 8.00% | 16.00% | 15.00% |
| EPS | 5.67 | 9.22 | 10.94 |