Sagility India IPO Day 1: Should you subscribe or skip? Check key details, GMP

Sagility India IPO: Before its launch, Sagility India was trading at a premium of Rs 3 in the grey market, indicating neutral investor demand. However, the GMP has now dipped to Rs 0. 

In Short

• Healthcare-focused Sagility India IPO opens for subscription
• Sagility India shows steady growth in US healthcare sector
• Analysts recommend subscribing for long-term growth potential

The Sagility India Limited IPO opened on Tuesday, marking the entry of this US-focused healthcare solutions company into India’s public markets. Investors have until November 7, 2024, to place their bids on this IPO, which has been priced between Rs 28 and Rs 30 per share.

Sagility India aims to raise Rs 2,106.60 crore through this offering, but unlike many IPOs, it’s an offer for sale (OFS). This means that all proceeds will go to the company’s existing shareholders, not directly into company operations.

LATEST GMP AND SUBSCRIPTION STATUS

Before its launch, Sagility India was trading at a premium of Rs 3 in the grey market, indicating neutral investor demand. However, the GMP has now dipped to Rs 0.

As of the first morning of bidding, the IPO saw mild activity, with total subscriptions at 5% of the issue.

Retail investors, who can apply in lots of 500 shares, have been the most active so far, subscribing at 24% of their quota, while non-institutional investors (NIIs) have shown lighter interest.

IPO SIZE AND PRICE BAND

Sagility India’s IPO has a price band set at Rs 28-30 per share, with a minimum bid of 500 shares per lot. The company’s goal with this offering is to raise Rs 2,106.60 crore at the upper end of the price band, with shares scheduled to list on the BSE and NSE on November 12, 2024.

Anchor investors, including notable names like HDFC Mutual Fund and Government Pension Fund Global, have already shown interest, purchasing shares at the upper price band and contributing around Rs 945 crore to the issue.

SAGILITY FINANCIALS AND ADVANTAGE

Sagility India provides critical services to the US healthcare industry, which has a steadily growing market. With the aging US population and rising chronic disease prevalence, healthcare spending has been growing at a compounded annual growth rate (CAGR) of 5.2% and is expected to reach $258.9 billion by 2028.

As one of the leading tech-enabled healthcare providers, Sagility’s deep-rooted relationships with key U.S. payers and providers could translate to sustained demand for its services.

Financially, Sagility India has demonstrated consistent growth, with revenue from operations rising 9.6% to Rs 1,223 crore in the latest quarter and by 12.69% in FY24, reaching Rs 4,753 crore.

Its EBITDA margins are healthy, recorded at 23.5% for FY24. This growth trajectory is appealing, especially for investors seeking a company that is already established in a complex market.

However, it’s worth noting that Sagility’s high exposure to the US market means it could face impacts from regulatory changes or currency fluctuations in the future.

WHAT DO BROKERAGES SAY

Experts highlight that Sagility’s IPO is valued at a P/E ratio of 56.6x based on FY24 earnings, which is seen as reasonable given its position and market potential.

Brokerage firms, including StoxBox and Master Capital, have recommended subscribing, highlighting the company’s established US healthcare sector connections, consistent client retention, and growth capacity in a complex industry.

StoxBox: Prathamesh Masdekar from StoxBox recommends subscribing, citing Sagility’s financial growth and significant client relationships in the US.

Master Capital: This brokerage also gives a 'buy' rating, pointing to the robust US healthcare spending outlook and Sagility’s role as a trusted provider for many top healthcare payers and providers.

Given its sector focus and the structure of its existing client relationships, the Sagility India IPO may be well-suited for long-term investors.

Analysts highlight that the US healthcare industry’s complex regulatory needs create high client loyalty and “stickiness,” meaning Sagility’s clients are likely to stay with the company for the long run.

However, since it’s an OFS, retail investors may want to consider that proceeds won’t directly fuel Sagility’s future growth initiatives.

SUBSCRIBE OR NOT?

Sagility India’s IPO presents a chance for retail investors to gain a foothold in a niche, tech-enabled sector with steady demand from the large US healthcare market.

While the grey market premium is modest, early subscription data shows encouraging interest, particularly among retail buyers. With major anchor investors backing the offering, this IPO is seeing strong institutional support, which could signal growth potential.

According to brokerages, this IPO is worth considering for retail investors eyeing long-term gains and portfolio diversification.

Its fair valuation, combined with favourable market dynamics and established client base, makes it a compelling choice for those seeking to add a stable, growth-oriented player in the healthcare space.

But as with any IPO, retail investors should consider their risk tolerance and investment goals.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)