Kids Medical Systems Limited

Started in 2013, Kids Medical Systems Ltd is engaged in providing solution in healthcare sector as pediatric clinic chain provider. Kids Clinic (TKC) is a venture of "Kids Medical Systems Private Ltd". They partner with doctors at a clinic /premise level. They offer services which help doctors to manage, educate and develop their clinic, its infrastructure, its people and provide guidance in services to parents of the child. They also provide services like timely reminders on vaccinations. They provide the service Management/Light Asset Model which includes the clinic Management Software, clinic reports, Training, recruitment of staff, Online and Offline engagement with customers. In addition they also provide Glow sign Boards, Paraphernalia, Standees and also arrange for co-branding marketing efforts, as and when required in Pre-School, Schools, mailers, SMS, whatsApp or other electronic or through other devices or modes. They are also engaged in providing hospital consultancy to their Doctor Partners. On financial performance, KMS has posted turnover/net profits of Rs. 0.24 cr. / Rs. – (0.41) cr. (FY14), Rs. 0.59 cr. / Rs. – (0.79) cr. (FY15), Rs. 0.96 cr./ Rs. – (1.11) cr. (FY16) and Rs. 2.26 cr. / Rs. 0.14 cr. (FY17). So FY 17 witnessed surprising results. For the period ended on 05.09.17 of the current fiscal, it has earned net profit of Rs. 0.03 cr. on a turnover of Rs.0.32 cr. Issue is priced at a P/BV of 2.81 and 1.86 on the basis of its NAV as on 05.09.17 and post issue. For last three fiscals it has posted an average EPS of Rs. - (0.87) and average RoNW of – (0.84) %. If we annualize latest earnings and attribute on fully diluted equity post issue, then asking price is at a P/E of 346 plus and if we consider FY17 earnings then P/E is 150 around, thus issue is very aggressively priced. There is no listed peers as per RHP to compare. On merchant banker’s front, this is the 10th mandate from its stable in past three years. Out of last 8 listings 3 opened at discount, 4 at par and 1 with just 0.40% premium to offer price on the day of listings. So track record is very poor. As per financials, company's growth is good (sudden jump in FY17 net profit is surprising), RoNW is - (0.84) % for last three fiscals and issue is very aggressively priced at P/E of 346 as per latest earnings. Health care sector and specifically pediatric branch has a promising future in India, but higher valuations and sudden rise in profit is concern. So, we give AVOID rating to this SME IPO.

• 1 Mr. Anirvan Amitava Dam
• 2 Mr. Pallavi Anirvan Dam