Review of Sagility India IPO

Full Review of Sagility India IPO

An IPO which doesn't need any GMP for thriving

Read till the End to Understand the Business and Check the Conclusion for Verdict

Business Overview

This Business was started in year 2000 and it was included in the Hinduja Global solutions Group as a part of Healthcare services division

Sagility India was carved out from Hinduja Global solutions in January, 2022 and it was carried out by EQT Private capital Asia

Company provides technology-enabled business solutions and services to clients in the U.S. healthcare industry

Company primarily focusing on health insurers (Payers) and Healthcare Providers (like hospitals and physicians)

Their service offerings span the following key areas:

1⃣ Services for Payers (Insurance Companies):

💠 Core Benefit Administration:

Sagility assists health insurers with essential administrative tasks that ensure smooth daily operations

Key functions include:
Claims management, enrolment, benefits plan building, premium billing, credentialing, and provider data management and Payment Integrity

💠 Clinical Functions:

These services help insurers provide better healthcare outcomes by managing members’ healthcare needs

This includes functions such as:
Utilisation management, care management, and population health management

Additionally, Company also provides some of the services to Payers to pharmacy benefit managers (“PBMs”) that manage prescription drugs for Members (i.e., insured persons) under health insurance plans

2⃣ Services for Providers:

Services to Providers include Revenue cycle management (RBM)

This segment focuses on supporting healthcare providers with financial operations, enabling them to collect timely payments for the services they offer

Functions include:
Financial clearance, medical coding, billing, and accounts receivable follow-up services

Segment Wise Revenue (FY24):
Revenue from Payers: 90%
Revenue from Providers: 10%

Company does 100% Business in USA and has talent pool from five global service delivery locations in India, the Philippines, the U.S., Jamaica and Colombia

Sagility has served five of the top 10 Payers by enrolment in the USA. As of June 30, 2024, Sagility had 42 client groups

In FY24 alone, Company helped Payers process 105 million claims and handle over 75 million Member and Provider interactions

Company's five largest customer groups had an average tenure of service of 17 years, which means there is solid Stockiness in this business and Clients are trusting Sagility with their services

As of March 31, 2024, Sagility had 35,044 employees out of which more than 16,000 employees are from India.

Company KPIs (FY24)
Revenue: 4,753 Cr, Adjusted PAT: 589 Cr, Adjusted PAT Margin: 12.40%, Debt to Equity: 0.15

Financials:

Company Financials are Solid

In Comparison with FY23, In FY24 Revenue rose 13% and PAT margins rose 57%

Company has Solid EBITDA Margins of 23-25% and PAT Margins of around 12%

In FY24, Company generated free Operating cash flow of 973 Cr which is huge

Company converts almost 87% of EBITDA into cash

Company currently has debt of around $110 Mn which company will repay till FY27 in parts.

*In Q1 FY25, Margins were impacted due to some adjustments but there will be no financial impact on the company from those adjustments

Valuations

Company is coming at very attractive valuations

Sagility is coming at around 20x PE and around 13x EV/EBITDA

Some Comparable Peers like Medi Assist and FSL are trading at PE of 55x and 50x

So it is clear that so much left on table for investors

Additional Points
- Management is Top Notch
- Anchor List was Solid
- No such GMP
- Pre IPO Investors were Solid

Some Risks

- There is Revenue concentration, Top 3 Clients accounted for 68% of total revenue in FY24
- There are some Litigations against the company but the Good part it, these are carved out Liabilities from the seller Hinduja Global Solutions and Bank Guarantees have been given to the Sagility. So there will be no impact on the company from those litigations

Conclusion

Sagility is one of its Kind Business which is going to be listed in Indian Stock Markets

US Healthcare industry value more than $4.7 Trillion which is more than Indian GDP and this company is in the business from more than 24 years

Management is confident for Revenue Growth of 12-14% every year and since they are a Cash Machine, they will be looking at Organic and Inorganic Growth in coming years

Bankers have priced this IPO very attractively and Fundamental wise this company is very solid

I feel this company deserves a place in our Portfolio for long long term

I am applying with Full Force in this IPO ✅

I am not worried about Listing Gains in this IPO, even if I don't get any Listing gains, I will be happy to hold this company stocks

If you are someone who target IPOs just for Listing gains and only takes safe bets then you might skip this one

For more clarity, one can wait for QIB Subscription for taking final decision

(Note: this is my personal read about the company, post is shared for educational purposes only, DYDD before applying)

#SagilityIPO #SagilityIndia #IPOAlert

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