Max India stock is an excellent buy

Max India stock is an excellent buy

By Rajiv Kapoor | 13 May, 2017
Max India, Max Group, Max Healthcare, NCR region, Max Bupa, gross revenue, International Finance Corporation, IFC

Max India Ltd is part of the $2 billion Max Group and is the holding company of Max Healthcare, Max Bupa Health Insurance and Antara Senior Living. Max Healthcare was launched in 2000 and is one of the largest healthcare providers with a combined 2,500 bed capacity across 13 hospitals. Saket City Hospital is the flagship brand and most recognised and accepted in the NCR region. Max Bupa is one of the country’s leading standalone health insurance company and is a joint venture between Max Healthcare and global leaders, Life Healthcare South Africa and Bupa Finance UK respectively. The company has reported a 23% growth in gross revenue to Rs 1,939 crore for the nine months ending FY2016 while its EBIDA grew 34% to Rs 203 crore. The company has recently announced raising of funds to the tune of Rs 300 crore from its sponsor Max Group’s founder by issuing share warrants at a price of Rs 154.76 per share translating into approximately 4% stake in the company. As a result of this transaction, the sponsor’s shareholding in the company will increase to 45.12% . A significant portion of the proceeds from this transaction will be utilised by Max India to acquire a 3.75% stake in its flagship business Max Healthcare (MHC) from International Finance Corporation IFC, which owns a 7.5% stake in it. The balance 3.75% stake held by IFC will be acquired by Max India’s joint venture partner, the Life Healthcare Group which is South Africa’s second largest hospital chain. The total consideration for the stake acquisition will be Rs 423 crore translating to Rs 105 per share of MHC. Post this acquisition, both the joint venture partners stake in MHC will increase to 49.7% each. The sponsors’ stake increase represents their commitment to the company and immense growth potential prospects of the underlying healthcare, health insurance and senior living businesses. The company is well poised to clock strongest growth among other hospital peers on the back of excellent earnings growth. This spurt will be fuelled by jump in additional capacity over the next few years in the high potential NCR market, international patients and service mix and cost efficient initiative measures undertaken by the company. The Max India stock currently quoted at Rs 156 is an excellent buy for one year investment with a 35% price appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

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