Max Healthcare has many plans to expand
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Improved Q1 results
Max India has produced improved Q1 results compared to Q4 results. Revenue has increased from Rs.128 crore to Rs.191 crore. Net loss has come down from Rs.13.47 crore to Rs.1.75 crore. Operating profit margin has increased significantly from 3.78% to 11.2%. Net margin has increased from a negative 10.51% to a negative 0.92%. Perhaps in the next quarter the company may post a net profit. The shares of Max India are traded in the stock markets at around Rs.190 now.
Max Healthcare is a subsidiary of Max India Ltd. Pervez A Ahmed, CEO & MD of Max Healthcare should be a busy man now days. Differences with the promoters have brought his end in the company. He should be scouting for new opportunities elsewhere. He will not find it difficult to get it as he is the son of the former President of India Fakruddin Ali Ahmed.
Negotiations for a strategic tie-up
Max Healthcare is negotiating an alliance with a private equity backed global major. Analjit Singh, Chairman of Max India stated recently that one of the two potential suitors is an Asian private equity fund having significant investment in a large hospital chain in South East Asia while the other fund is US-based and owns significant stake in a leading hospital chain. Max Healthcare is a 1100-bed hospital subsidiary of Max India group. Recently, Max India decided to buy out 16.37% stake in Max Healthcare from private equity firm Warburg Pincus to take its total stake in Max Healthcare to 91%. Max India has interests in hospital business, life insurance and health insurance business. If the PE investment in Max Healthcare materialises, it will bring a global strategic alliance and also synergy with it. According to plans, the PE investment in Max Healthcare will be a little above 26%. International Finance Corporation (IFC) owns 3.1% stake in Max Healthcare and the remaining stake of around 65 is owned by overseas corporate bodies.
IPO in the offing
The proposed PE investment in Max Healthcare will bring the company Rs.1500 crore. Warburg Pincus sold its 16.37% stake to Max India for Rs.140 crore. This means the value of the company is Rs.855 crore. This also means that the PE investment is much above the rated value of Max Healthcare. The company’s network of hospitals brought in a revenue of Rs.685 crore in 2010-11. This was a growth of 28% over the previous year. In Q4, the company reported profit. In FY 2012, the company has plans to expand its bed capacity from 1100 to 1900. It wants to commission four new hospitals across north India. In 2012-13, Max Healthcare wants to go public by issuing an IPO.
Max New York Life performs well
In FY 2011, Max New York Life net jumped twelve fold to Rs.283 crore. It got regulatory nod to sell 4% stake to Axis Bank. The total revenue which is the premium income increased by 20% to Rs.5812 crore from Rs.4861 crore. New business premium increased by 11% to Rs.2061 crore and renewal premium increased by 25% to Rs.3751 crore. The sum assured increased by 26% to Rs.154687 crore from Rs.123288 crore. Assets under management increased by 37% from 10116 crore to Rs.13836 crore. Rajesh Sud is the CEO and MD of the company. Max New York Life and Axis bank have entered into an alliance to sell bankassurance policies to the customers. The paid up capital of the company is at Rs.1976 crore. Bankassurance accounts for 23% of the company’s sales. Agency channel accounts for 47%. The company has Yes Bank and Axis Bank as two large bankassurance partners. In addition, it also has tie-ups with 40 co-operative banks. ULIPs account for 61% of the total number of policies sold.
Max Healthcare is planning to invest Rs.1000 crore in the next three years to set up a medical education institute in Greater Noida. The institute will include a medical college, a nursing college and a college for allied health services. The medical college will have 50 seats to begin with. It will be raised to 150 in due course of time. Allied healthcare institution will have 300 seats. It will offer various certificate and diploma courses. The company also plans to set up three more nursing colleges in different places. One of the places is Dehradun. One of the promoters of Max India Dynavest India has converted warrants into equity shares for Rs.l73.4 crore.
Buy the shares at decline at around Rs.150
At the current price of Rs.190, investors should not enter the scrip. They should wait patiently for the scrip to decline. At around Rs.150, it will be an ideal buy for medium term investment for decent returns.
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