Relgare Health Trust

Religare Health Trust ("Religare" or "RHT" or the "Company") registered its prospectus today. The link is here and my IPO preview is here.

RHT is offering 567,455,000 common units at $0.90 each. It has priced its offer at the lower end of the indicative range. RHT offers investors an exposure into Indian healthcare centre. Based on the offering price, the projected yield for FY2013 (annualised) is 8.9% and 9.1% for FY2014. 12m shares will be offered to the public and the rest will be via placement. The offer will end at 12pm on 18 Oct 2012 and starts trading on 22 Oct 2012. Considering that it is open to the public for such a short period of time, you can probably guess that the placement tranche has already been fully placed out. While there are claims that the placement is 2.5x subscribed, i do have my doubts. :P

Initial Portfolio

The picture above shows you the initial assets which is valued at S$748m.

Sponsor is cashing out

There is no doubt in my mind that Fortis is 'cashing out' its assets. By recycling this into a Trust, it can then receive proceeds which can then be used to make fund new healthcare assets at the Fortis level.

Distribution Waiver

One key thing which you may want to take note is that the Sponsor has 'waived' its entitlement to the cashflows for FY2013 and FY2014 (ending 31 March 2014). In other words, the yield is inflated and once the period expire, the Sponsor will be paid its pro-rata share of the cashflow. This has inevitably created the impression that the yield is high but it is not 'sustainable' as the yield will drop once the waiver period is over assuming all things remain equal. 

Attractive Sector?

I like the Healthcare Sector. The demand is pretty inelastic and seemed to have a lot of headroom to move upwards in a growing economy like India. However, i don't like the operating environment in India. There seemed to be a lot of uncertainties with regards to operations, licensing, regulations etc. 

Use of proceeds

The proceeds from IPO will be mainly used to acquire the portfolio.

The sponsor will hold only 28% of RHT post IPO with the balance of 72% held by public and institutions. The IPO is offered to investors at 90c.

Depreciating INR

As mentioned in my preview post, the depreciating INR is a constant worry as the revenue will primarily be derived by the hospitals in India.

Conclusion

It is a 'mixed' bag for me with some plus and many minuses. I will give it a 1 Chilli rating, i.e buy only if you like it.The float is pretty big, thus there should be enough supply to satisfy all the demand for the units. Thus don't expect too much of a fireworks and it may even be difficult to stag this. 

Happy IPOing