Medi Assist Healthcare IPO: 10 key things to know from RHP

The initial public offering (IPO) of insurance-tech company Medi Assist Healthcare opened for subscription on January 15, 2024, and will close on January 17, 2024. The firm has fixed a price band of ₹397-418 per share for the issue.

GMP: Shares of Medi Assist Healthcare have been available for trade in the grey market since the weekend. The company's shares in the grey market continued trading at a premium of ₹38, indicating a 9 percent premium versus the IPO price at listing. It has increased from ₹33 in the previous session.

However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.

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Medi Assist IPO subscription status

By 1:00 PM on Day 2 of bidding, the public issue got subscribed 0.84 times. The issue received bids for 1.64 crore shares as against 1.96 crore on offer. Retail investors' portion was subscribed the most and was the only fully subscribed category with 1.35 times bids. Meanwhile, the NII (non-institutional investor) quota was subscribed 0.78 times, however, the QIB (qualified institutional buyers) part had not received any bids.

About Medi Assist

Medi Assist Healthcare Services Limited offers insurance companies third-party administration services through its wholly owned subsidiaries, Medvantage TPA, Raksha TPA, and Medi Assist TPA. An organisation that handles health insurance claims on behalf of insurance companies and offers services like network management, policy administration, and customer service is known as a third-party administrator.

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As of September 30, 2023, the company has established a pan-India healthcare provider network that includes 18,754 hospitals spread across 1,069 cities and towns, 31 states (including union territories), and 141 countries worldwide.

The company, in its red herring prospectus (RHP), stated that there are no listed companies in India that engage in a business similar to that of them and their subsidiaries.

10 key things to know from RHP

About the IPO: The ₹1,171.58 crore IPO comprises only offer-for-sale (OFS) by investors and promoters of 2.8 crore shares and there is no fresh issue component. Therefore, the selling shareholders will receive the entire issue proceeds, except the IPO expenses. Dr. Vikram Jit Singh Chhatwal, Bessemer India Capital Holding II Ltd., and Medimatter Health Management Private Limited are the company's promoters.

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Reservation: Around 50 percent of the entire offer has been reserved for qualified institutional buyers (QIBs). Further, 15 percent of shares of the IPO are reserved for non-institutional investors (NIIs) (or high net-worth individuals), and the remaining 35 percent for retail investors.

Important dates: The allotment for the Medi Assist Healthcare IPO is expected to be finalised on Thursday, January 18, 2024. Medi Assist Healthcare IPO will be listed on BSE, NSE with the tentative listing date being January 22, 2024.

Book-running managers: The book-running lead managers of the Medi Assist Healthcare IPO are Axis Bank Limited, IIFL Securities Limited, Nuvama Wealth Management Limited, and SBI Capital Markets Limited. The registrar of the offering is Link Intime India Private Ltd.

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Medical inflation in India: Medical inflation is almost double the general inflation rate, making healthcare OOP (out of pocket) a huge burden to households with elderly and diseased. The cost of healthcare goods and services, also known as medical inflation, has increased in India. A recent report by Aon Hewitt & WTW showed that medical inflation in India rose from 8.65 percent in 2021 to 13.60 percent in 2022, said the RHP. The medical inflation growth CAGR between CY 2021 and 2023 is estimated to be 11.94 percent.

Health insurance penetration and density: Insurance penetration and density in India for health insurance have increased in recent years. This increase in health insurance penetration and density can be attributed to several factors, including rising healthcare costs, increasing awareness about the need for health insurance, and the introduction of government-sponsored health insurance schemes such as Ayushman Bharat, which provides health insurance coverage to economically vulnerable families, noted the RHP.

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Third-party administrators (TPAs): In recent years, TPAs have emerged as prominent players in the group segment, with over 60 percent of the premiums serviced by them. The TPA serviced group segment has witnessed rapid growth in terms of premiums processed, with a 22.19 percent increase between FY18 and FY22. As corporations expand their coverage for employees and dependents and offer more prevention, wellness, and health-tracking services, insurers will likely rely on TPAs for cost containment, customised programs, efficient claims processing, and overall management. It is expected to drive a significant growth of around 25 percent in the TPA segment over the next five years, informed the RHP. TPAs also supported almost all government schemes during COVID-19 and witnessed a CAGR of 20.52 percent from FY 2018 to FY 2022, it added.

Competitive landscape: As per the RHP, Medi Assist's market share has been increasing in the third-party administrators (TPAs) segment, with consistently improving financial performance. 25 TPAs were operating in 2019-2020; however, given the ongoing consolidation and challenges experienced by many players in the industry, the number has shrunk to 20 in June 2022.

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MDIndia, Medi Assist, and Vidal Health account for 32.21 percent of the total health insurance premium, with Medi Assist contributing a 28.08 percent share of the total TPA service revenue in FY22 and consistently higher EBITDA and PAT compared to the average industry margins across the pool of all TPAs. For FY23, Medi Assist's total revenues accounted for 28.64 percent, EBITDA accounted for 56.94 percent, and profit after tax accounted for 98.82 percent of the Indian TPA industry revenue, EBITDA, and profit after tax, respectively. The company's high profitability can be attributed to the management's focus on the relatively profitable group and retail health insurance segments.

Group portfolio: The firm works with corporates in a diverse range of industries and sectors to help administer the insurance requirements of their employees. While it has been providing services in India, through Mayfair UK, it has been able to extend services to corporates overseas and provide services to customers on a global platform. Its group accounts premium managed increased from ₹6,820 crore for FY21 to ₹12,817 crore for FY23 and has grown at a CAGR of 37.08 percent. For the financial years 2021, 2022 and 2023 and the six months ended September 30, 2023, its revenues attributable to its group accounts portfolio were 65.90 percent, 71.17 percent,74.41 percent and 72.19 percent of the revenue from contracts with customers, respectively.

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Claims: During the financial years 2021, 2022 and 2023 and the six months ended September 30, 2023, the firm processed claims amounting to ₹7,570 crore, ₹12,917 crore, ₹13,599 crore and ₹7,949 crore, respectively, across all providers (including those not on its network), showing steady growth in the number of claims processed by the firm. Its cashless claims payout-inflation CAGR between FY 2021 and 2023 was 5.58 percent (excluding claims arising from the COVID-19 pandemic), which is less than half of the estimated CAGR for medical inflation in the country of 11.94 percent, noted the RHP.