IPO Size: Rs. 871 cr

• Fresh Issue of Rs. 353 cr (i) Rs. 129 cr capex for 167 new centres in India (ii) Rs. 136 cr debt repayment (already net debt free)
• Offer for Sale (OFS) of Rs. 518 cr: 27% by IFC (halving 6% stake), 17% by 360 One (halving 3% stake), 55% by 3 funds classified as promoters (79% combined holding to drop to 67% post IPO)

Price band: Rs. 438-460 per share

M cap: Rs. 4,615 cr, implying 19% dilution

IPO Date: Wed 10^th Dec to Fri 12^th Dec 2025, Listing Wed 17^th Dec 2025

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Asia’s Largest Chain of Dialysis Clinics

Nephrocare Health Services, is a 15 year old Hyderabad based operator of 519 dialysis centres in 4 countries (90% in India, mainly in tier 2/3 towns), which involves a recurring (thrice a week) and life-sustaining treatment for patients.

• 52% of clinics are inside private hospitals (company shares revenue with hospital) contributing to 37% of Rs. 950 cr annual revenue
• 34% under PPP model in government hospitals
• Balance are standalone clinics under brand ‘NephroPlus’

International realization in Uzbekistan and Philippines is 3-13x of India, partly being government funded. Thus, 10% of company’s clinics located outside India generate 40% of revenue, and are the key contributors to overall profitability. As international centres matured, EBITDA margin expanded from 11% in FY23 to 23.5% in H1FY26. One then wonders why all capex via fresh issue is directed towards India, clocking lower profitability?

High Single Digit Net Margin

On 72% centre utilization in FY25, revenue stood at Rs. 756 cr, with EBITDA excluding other income of Rs.167 cr or 22% margin. In H1FY26, utilization improved to 75%, revenue rose to Rs. 473 cr, EBITDA excluding other income and one-time cost at Rs. 149 cr, implying 31% margin. However, depreciation burden is huge (on machinery), resulting in operating PBT margin of 10-11%. FY25 PAT stood at Rs. 67 cr, while H1FY26 was AT Rs. 14 cr, pulled down due to one-time non-cash bonus of Rs. 37 cr.

Stretched Receivables Cycle

Business demands high working capital. On Rs. 950 cr annual revenue run-rate, Rs. 330 cr debtors are outstanding, representing over 4 months. This is quite stretched as nearly 40% revenue comes from private hospitals. It also implies that half of company’s net worth of Rs. 717 cr, as of 30.9.25, goes towards receivables alone. No wonder RoE is in low teens, despite double digit PBT.

Expensive Valuation

M cap of Rs. 4,615 cr, implies a PE multiple of over 44x on FY26E PAT (adjusted for one-off) of about Rs.100 cr. This is definitely seen expensive for single digit margin and planned expansion in a lower-profitable geography like India.

Although not a direct peer, pathology player Dr. Lal Pathlabs is trading at PE of 42x, for much larger topline of Rs. 2,500 cr, stronger net margin of 15-16% and 24%. Thus, Nephrocare IPO pricing is unattractive.