Rainbow Childrens Medicare IPO lists at 6.6% discount; share falls further

Shares of Rainbow Childrens Medicare (RCML), a multi-speciality pediatric hospital chain, made a weak opening at Dalal Street on Tuesday, with stock price listing at a 6.6% discount at ₹506 apiece on the BSE, as compared to its upper end of the IPO price band of ₹516-₹542 per share. On the National Stock Exchange (NSE), the healthcare stock begins trading at ₹510, down 5.9% from the issue price. In comparision, the benchmark indices, the BSE Sensex and the NSE Nifty, opened 0.3% lower, led by losses in index heavyweights such as Reliance Industries, Tata Steel and Titan as well as weak global cues.

Post listing, RCML shares extended fall and declined as much as 11.3% to hit a low of ₹480.80 on the BSE. The market capiltalisation of the company stood at ₹4,935 crore as 4.58 lakh shares worth ₹22.85 crore changed hands over the counter on the BSE.

RCML received muted response from investors, unlike athleisure footwear brand Campus Activewear, which surged 23% on initial public offering (IPO) debut despite bearish broader markets on Monday. Extending its rally for the second day, the footwear stock gained as much as 8% to hit an intraday high of ₹409.10 on the BSE today.

The soft listing of the Hyderabad-based chain of paediatric hospitals was in line with market expectations given that its ₹1,581 crore IPO received mild response from bidders, especially qualified institutional buyers and retail investors. Overall, the IPO of Rainbow Children's Medicare was subscribed 12.43 times, driven by strong support from qualified institutional buyers whose quota was subscribed 38.9 times. The portion for non-institutional buyers and retail investors were booked 3.73 times and 1.38 times, respectively.

The south-based healthcare company has raised ₹1,581 crore via IPO, which comprises a fresh issue of ₹280 crore and an offer for sale (OFS) of ₹1,301 crore by existing shareholders. The company intends to use IPO proceeds to expand its hospital network through the acquisition of brownfield assets or the development of greenfield assets.

Incorporated in 1998, Rainbow is a leading multi-speciality paediatric and obstetrics and gynaecology hospital chain in India, operating 14 hospitals and three clinics in six cities. It is backed by U.K.'s development finance institution CDC, which holds around 30.5% shares of RCML. The company’s core specialities are paediatrics, which includes newborn and paediatric intensive care, paediatric multispecialty services, paediatric quaternary care (including multi-organ transplants); and obstetrics and gynaecology, which includes normal and complex obstetric care, multi-disciplinary fetal care, perinatal genetic and fertility care.

For the nine-month ended December 31, 2021, the company reported revenue growth of 56.6% to ₹761 crore, from ₹486 crore in the same period last year. The profit after tax jumped 228%, thanks to increased patient visits due to easing concerns over the Covid-19 pandemic. It registered a healthy EBITDA and PAT margins of around 26.6% and 7.3% (3-year average) with a strong average return of equity of 11.5% over FY19-FY21, as per domestic brokerage Geojit.