Entero Healthcare Solutions Limited IPO – Get Date, Price, Review and Details

In this article, we will discuss:

• Business Overview
• Objects of the Issue
• Risks
• Strengths
• Financial Snapshot
• Conclusion

Business Overview

It is incorporated with a vision to create an organized, pan-India, technology-driven, and integrated healthcare products distribution platform that can add value to the entire healthcare ecosystem. It adds value to the product manufacturers that work with the company by providing them with reach and accessibility to pharmacies, hospitals, and clinics through the integrated and technology-driven distribution platform.

As of March 31, 2023, there are 73 warehouses located across the country to ease the process of last-mile deliveries. Further, they have contracts with over 1,900 healthcare product manufacturers that provide access to over 64,500 product Stock Keeping Units (SKUs).

Objects of the Issue

• Repayment/prepayment, in full or part, of certain borrowings availed of by the Company and its Subsidiaries (Rs. 123.6 crores).
• Funding the long-term working capital requirements (Rs. 600 crores).
• Pursuing inorganic growth through acquisitions.
• Balance for General corporate purposes.

Risks

• High levels of debt because of high working capital requirements for day-to-day operations. The inability to maintain an optimal level of working capital or financing requirements may impact the operations adversely.
• The losses in the last 3 FYs were primarily due to expenses towards COVID-19-related inventory write-offs and losses relating to our scaled-down ancillary business.
• Failure to maintain optimum inventory levels would lead to a rise in operating costs or unfulfilled customer orders, either of which would hurt the business, financial condition, results of operations, and prospects.
• The company has pledged the equity shares of a few subsidiaries in favor of lenders to secure loan facilities availed by it and its subsidiaries.
• The company did not enter into any long-term agreements with the customers. As a result, the customers can terminate their relationships without notice, which could adversely impact our business.

Strengths

• It operates in the large and highly fragmented Indian healthcare products distribution market and is expected to benefit from market consolidation.
• It is one of India’s largest and fastest-growing healthcare product distribution platforms.
• The company has a proven track record of inorganic expansion and integration to enhance its geographical reach, revenues, and scale .
  
• The company has an experienced, and qualified professional management team with deep industry expertise.

Financial Snapshot (Rs. In Crores)

Conclusion

Global healthcare spending has been rising in sync with economic growth. Globally, healthcare expenditure as a percentage of GDP increased from 9.4% in 2011 to 10.9% in 2020 due to the availability of better medical facilities, advancements in medicine, and an increase in disposable income.

India’s public spending on healthcare services is much lower than that of its global peers. In 2020, India’s expenditure on healthcare was just 3% of GDP.

It has only a single listed peer namely Medplus which is trading at a PE of 216x having RoCE of 5% and RoE of 3%. Entero’s PE cannot be determined due to its losses and its RoCE & RoE stands at -2.6% & -1.8% respectively as of 31 ^st Mar 2023. Further, the company has no bargaining power over its suppliers and the business is completely dependent on the suppliers’ pricing structure and discounts to make some profits.

Considering the company's business structures, financial performance, and future outlook, the valuations seem to be on the higher side. 

So, we suggest our investors “Avoid” this IPO.