Sagility India Ltd IPO | News | Overview | Verdict

IPO listed on 12 Nov'24

Sagility India Ltd

Minimum Investment

₹ 15,000 / 500 shares

Grey market premium

₹ 0

Issue price

₹ 30

Listing price

₹ 31

Listing gains

1.06 (4%)

Listing on

Nov 12, 2024

Our Verdict:

Neutral

The IPO of Sagility India Ltd (Sagility) offers an unique opportunity to invest in the growth of US healthcare demand. The firm operates in a competitive landscape, contending with specialized firms like CorroHealth, Shearwater Health, and Omega Healthcare, as well as established IT giants such as Cognizant and Accenture. However, it's important to note that this IPO is entirely an Offer for Sale (OFS), meaning the raised funds will not be reinvested into the company.
US healthcare spending, the highest among leading economies, is projected to grow at a CAGR of 5.5% from 2023 to 2028. The US healthcare outsourcing market is expected to expand by 8.7% over the next five years. With Sagility holding ~1.23% market share, the company could see significant growth opportunities.
In terms of valuation, Sagility's IPO is set at a price-to-earnings (P/E) ratio of 61.5x based on FY24 earnings, which appears steep due to various non-cash adjustments.
With the IPO appearing fully priced, substantial listing gains are unlikely. Given the company’s limited operating history, it would be prudent for long-term investors to monitor the company’s performance in the next couple of quarters before making investment commitments.

About the company

Founded in

28 Jul'21

Managing director

Ramesh Gopalan

Sagility India Ltd offers a range of services that help healthcare providers and insurers improve patient care, manage costs, and streamline operations. Following its acquisition of Hinduja Global Solutions' services business in January 2022, the firm operates a multi-shore model, delivering services from five countries, primarily for U.S.-based Payers and Providers.
For Payers, Sagility provides claims management, payment integrity, and clinical operations, ensuring accurate claims processing, cost efficiency, and regulatory compliance. For Providers, it handles revenue cycle management tasks like financial clearance, coding, and billing, boosting cash flow and easing administrative burdens. Currently, around 90% of its revenue comes from Payer clients, with the remainder from Providers.

STRENGTHS

Financial Growth: Despite a limited financial history, Sagility has shown impressive growth metrics over the past two years. In FY24, there was a 13% increase in operational revenue, a 12% rise in EBITDA, and a significant 29% growth in net profit compared to FY23. Additionally, the adjusted net profit margin improved, climbing from 10.8% to 12.4%.
Marquee Clientele: Sagility serves a roster of prestigious clients in the health insurance sector, including leading US-based firms and Fortune 500 companies. The firm demonstrates exceptional client retention, with an average client tenure of 17 years among its top customers.

RISK FACTORS

Client Concentration: Sagility’s revenue is significantly dependent on a limited number of clients, with the top 10 contributing to over 91% of its total revenue. This heavy reliance could jeopardize revenue stability if key clients decide to switch providers or scale back their outsourcing.
Industry Concentration: Sagility’s operations are exclusively tied to the US healthcare industry, making it susceptible to industry-specific downturns or other adverse trends.
Talent Retention: Retaining skilled employees presents a major operational challenge for Sagility. Employee costs represent ~62% of revenue, while the company grapples with a high attrition rate of ~28%, indicating potential issues in maintaining a stable and experienced workforce.
Goodwill and Intangible Assets: Following the acquisition of HGS, Sagility reported significant amounts of goodwill and intangible assets—totalling Rs 5,679 crore and Rs 1,967 crore, respectively, as of June 30, 2024. Any impairment of these assets could adversely affect the company’s financial health.
Legal Risks: Sagility is involved in legal disputes, with pending proceedings against its subsidiary amounting to Rs 985.28 crore as of June 30, 2024. Unfavourable resolutions could damage the firm’s reputation and financial condition.

Issue details

Issue type

Mainstream

Issue size

₹ 2,106.60 crore

Fresh Issue

₹ -

OFS

₹ 2,106.60 crore

Price range

₹ 28 - 30

Lot size

500 shares

Issue Objective

This is a pure Offer for Sale (OFS), which means the company will not receive any proceeds from the offer, and all proceeds will go to the Selling Shareholders.

Dates

Bidding open

5 Nov'24

Bidding close

7 Nov'24

Allotment date

8 Nov'24

Refund date

11 Nov'24

Listing

12 Nov'24

IPO Reservations

Qualified institutional buyers

> 75%

Non-institutional investors

<15%

Retail individual investors

<10%

Read the Offer Document

This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.

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