Started in 2004, at Ahmedabad Gujarat, Shalby Limited ('SL') is multi-specialty chain of hospitals in India. Their hospitals are tertiary care hospitals, few of which also offer quaternary healthcare services to patients in various areas of specialisation such as orthopaedics, complex joint replacements, cardiology, neurology, oncology, and renal transplantations. SL provides inpatient and outpatient healthcare services through eight fully operational hospitals, having an aggregate operational bed count of 781 beds, as on March 31, 2017. This apart, SL currently provides outpatient consultative healthcare services through three hospitals which were recently set up. Their 11 hospitals, inclusive of eight fully operational and three recently set up hospitals, have an aggregate bed capacity of 2,012 beds, as on March 31, 2017. SL had a 15% market share of all joint replacement surgeries conducted by private corporate hospitals in India in 2016. They also provide outpatient services through 68 Outpatient Clinics and have eight shared surgery centres within third party hospitals, which they call 'Shalby Arthroplasty Centre of Excellence' ('SACE'), where they offer orthopaedic healthcare services including surgeries. Since March 2007, they have conducted an aggregate of 84,579 surgeries, and provided healthcare services to an aggregate of 923,441 patients, consisting 121,576 inpatients and 801,865 outpatients. SL has a domestic and overseas outreach through a network of hospitals in India, and Outpatient Clinics and SACE located in India, Africa, and the Middle East. Having strong presence in western and central India and focus on Tier – I and Tier – II cities, their hospitals operate across five states, their Outpatient Clinics operate across 53 cities in 16 states in India, and SACE are present in five cities in four states in India. Their international footprint consists six Outpatient Clinics and one SACE in Africa, and two SACE in the UAE. Apart from a focus on orthopaedics, their hospitals provide advanced levels of care across various specialties such as neurology, cardiac care, critical care, oncology, and nephrology. Some of their hospitals are equipped with modern equipment which inter alia, include linac systems, holmium lasers, thulium lasers, and intra-operative neuro monitoring systems. Their hospitals, Krishna Shalby, SG Shalby and Shalby Jabalpur are accredited by the NABH. Further, Krishna Shalby and SG Shalby are also accredited by the NABL. As a part of their ancillary services, they offer certain educational programmes through 'Shalby Academy', home-based healthcare services under 'Shalby Homecare', and also undertake clinical research trials. Through Shalby Academy, they offer educational programmes including diplomas and fellowships in a range of medical and para-medical disciplines. Under Shalby Homecare, they offer home-based healthcare services, which inter alia, include nursing services, physiotherapy services, and home deputation of medical officers. Further, SL has been engaged in conducting clinical research trials since 2006. These clinical research trials are conducted at their hospitals SG Shalby and Krishna Shalby. The clinical research trials are supervised and monitored by ethics committees, and are typically sponsored by pharmaceutical companies and various clinical research organizations. On performance front, Shalby has reported turnover/net profits of Rs. 229.83 cr. / Rs. 15.01 cr. (FY13), Rs. 261.68 cr. / Rs. 37.75 cr. (FY14), Rs. 277.63 cr. / Rs. 24.55 cr. (FY15), Rs. 292.56 cr. / Rs. 36.32 cr. (FY16) and Rs. 332.86 cr. / Rs. 61.57 cr. (FY17). For Q1 of the current fiscal, it has posted net profit of Rs. 14.48 cr. on a turnover of Rs. 90.60 cr. For last three fiscals, it has posted an average EPS of Rs. 5.50 and average RoNW of 20.42%. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of 46 plus against its peers trading at a P/Es ranging from 15 to 111 with a composite average P/E of 68. Company's top line has been showing uptrend, but bottom line has shown inconsistency for FY 13 to FY16 and sudden jump in FY 17. As per company due to its spending for expansion in multi-specialty projects and new project attaining brake-evens, this has happened and such trends will continue as it is still spending for new capacities. Once all its new units turn profitable, its bottom line is set to see multi fold increase. As issue appears fully priced, but its continuous growth makes it a bet worth considering. On BRLM’s front, three merchant bankers associated with the offer have handled 35 public offers in the past three years, out of which 10 issues closed below the offer price on listing date. As per financials, company's growth is good, RoNW is 20.42% for last three fiscals and issue is fully priced as per latest earnings. Shalby Limited is a chain of multi-speciality hospitals and currently its on expansion path, so for next 2-3 years profit of company will show inconsistency, so we give NEUTRAL rating to this SME IPO.
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