Per the Company Secretary, Mr. Pankaj, this should be done by August end. Advertisement was published in BS today, per sources. Now company has fulfilled all the documentation, and just needs to submit to exchanges (hopefully by Tue/Wed). Think 2-3 days after submission, the stock will trade. So quite nearby, fingers crossed.
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Yes, its good to see the market price in some of the positives. Next trigger is the potential plans for increase in beds by 2000+ (i.e. a 2/3rd increase) in existing hospitals itself. The capex figures, timelines, etc related to this expansion as it comes in will help the market to price in future growth. EBITDA margins has been trending upwards with new mgmt, and their ability to manage with increased beds will provide the base for stock price. Also new mgmt wants to leverage the non hospital segments like Max Labs. Future plans for these and scalability (similar to Apollo Pharmacy) will be keenly watched.
Aug 28th Fri is listing date. Refer https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20200826-9
Heard good things about Abhay Soi, looking forward how things pan out for Max Healthcare.
Business Overview: Max Healthcare Institute Ltd
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Disclaimer: I have sold out of Max India (got some accounting losses to offset with something else) once the 85Rs. 20% share capital reduction was announced. Max Healthcare i continue to retain.
Max India - The 5 year 500+Cr revenue target for Care business & another 500Cr revenue for Senior residences looks very ambitious. The 85Rs. buyback was much lower than the 160+ per share value that they mentioned in their presentations. The stock might be attractive at lower levels, and/or once the business models begins to show promising results. Till the business matures, i will keep a watch on this one, and sit out for now.
Max Healthcare - Led by an energetic knowledgeable Abhay Soi, Less overhang of share sales by Analjit Groups cos, impressive expansion plans within existing hospitals, etc looks good. The stock is valued on the higher side maybe because of these future expansion and growth levers.
Updated the Blog: https://sites.google.com/view/prudentsteps/finance-home/max-india
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Good analysis in the blog. Thanks for sharing.
For Max India, the book value seems to be 170 rs. As per the presentation, they have liquid cash of 400 cr (100 cr for capital reduction & 300 cr for antara). They are planning to monetize Max Towers for another 100 cr. Even though the Dehradun project seems to be an expensive mistake, I am sure they seems to have learnt from the experience (which we can see from decision to go for affordable projects (Noida) & future plan to take up only full asset light future projects). Lot of negatives are baked in at current price (60 rs & market cap of 320 cr) and any success would be +ve from here onwards including the short sized buyback. The business model is surely unproven. But I think, they are being prudent, when they are going for Care homes on pilot basis (2 centers), instead of scaling up rapidly or fully constructing the centers by themselves. If you don’t mind, can you elaborate little more on the reasons behind sell decision? Thanks in advance.
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To be frank, for me this was a special situation (before demerger & relisting) where Max Healthcare was not getting correctly valued just 2-3 weeks before record date. I bought late May/First week of June to buy Max Health at that depressed price. Remaining Max India was not my core play.
Max India Mgmt might be good, prudent, but this will take time to prove out, with associated risks. The results will take atleast 6-8 qtrs to show progress & maybe then i can take a relook. The price might move on, but i will be comfortable buying the business at a higher price with a proven model that can be replicated.
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One other update from Max India call this week was on the capital reduction.
Promoters are requesting SEBI for exemption from open offer since the 20% capital reduction, will end up pushing promoter holding from 40% to ~51% (more than 5% creeping acquisition limit). Per mgmt, since this capital reduction is similar in nature of a buyback, where the 5% acquisition limit is not applied, and SEBI does not mandate a open offer, they were sure this would not be a road block. But in worst case, if they had to reduce this buyback to within the 5% limit, then the buyback size will be 10.9% of outstanding shares (~53L shares).
So from 3.18Cr public shares, ~53L will be acquired in worst case. That will be 16.6% acceptance, i.e. 1 in 6 shares if all public shareholders tender. Not much to be made, but clarity will come in another 2-3 months, overall process to complete share capital reduction will take 5-7 months.
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Agree. Max India needs to watched for some more time. New Business models are many times prone to failure as well.
Post demerger few thoughts on residual business based on the Presentation and concalls:
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Market Cap@58rs: 310 cr
5.38 cr total outstanding shares;
Promoters: 40.89% (82% pledged after revoking 18% pledge on 4thSept2021)
FPI: 36.91%
Retail: ~15.4 [Ashish Dhawan: 6.06] -
Businesses involved in: Senior Living Housing, Care Homes, Care at Home
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Networth: 120-130 rs per share as per concall
-
Assets (As per presentation):
a) Antara Dehradun: 212 cr (Invested capital after 150 cr write off/impairment)
(Management mentioned some debt component but did not give exact figure)
(Unsold inventory of 66 units, Ownership of Club House & Usable FSI)
b) Antara Noida: 158 cr (Invested capital)
c) Max Towers: 100 cr (61lk sqft - potential rental 6cr/year on full lease; they put it on block for sale)
d) Liquid Cash: 400 cr (300 cr reserved for Antara for next 3-4 yrs & 100 cr for 20% capital reduction @85 rs per share; Reduced from 200 cr planned precovid & used for “forced” Dehradun debt repayment)
e) Care Homes: 12 cr (Invested capital)
f) Debt: 180 cr long term debt during Q3FY20. Seems to have paid off 80 cr after debt is recalled by lender & 100 cr debt retained by putting the Max Towers as collateral. -
Estimated total invested capital: 882 cr
-
Liabilities: [To be filled after balancesheet is published]
a) Dehradun: 80-100 cr (guestimate)
b) Noida: 50-60 cr (guestimate)
There is mention of project level debt, which will be paid from cash flows of Antara Dehradun
-
Antara Dehradun (14 acre; Launch year was 2013):
No of Apartments (#) 197
Apartments Sold Net (#) 129 [65.5% sold]
Sales Value (INR Cr) 394
Collections (INR Cr) 343
Operations income (INR Cr) 11
Resident Satisfaction Score (%) 91%
They had to write off 150 cr in this project (interest due to prolonged sales cycle + other costs). Pretty much they made lot of mistakes in this project, in terms of demand of expensive homes and the maintenance cost etc.
Interestingly, from last two presentations, the number of sold apartments increased by 5 but collections stayed same (sales value increased by 14 cr).
Q3FY19 Q1FY20 Q3FY20 10thAug21 14thSept21
Total Units 192 192 192 197 197
Units Sold- 107 116 123 124 129
Collections 274 UKN 332 343 343
Sales Value UKN UKN UKN 380 394
Debt xxxxxx UKN UKN 176 UKN UKN
Gross Eqity UKN UKN 265 337 337
ICD xxxxxxx UKN UKN 019 025 025
UK --> Unknown
Investment in Clubhouse: 66 Cr, Usable Land: 17 cr [as per Q3FY20 PPT]
-
Antara Noida (4 acre; Launch Date: 15th Jan 2020):
Planned units: 550 in 2 phases (as per Q1FY20 PPT)
Num of Apartments (#) 340
Apartments Sold Net (#) 108 [31.76%]
Sales Value (INR Cr) 182
Collections (INR Cr) 11
Price range 1 to 1.8 cr/unit
Antara’s contribution: 25 cr (secured loan @18% ROI) + 26 cr (expenses) + Corporate Guarantee for 130 cr Project Debt
Developer’s Contribution: Land
Fee for Antara: 10% of revenues
Antara’s share in surplus: 62.5%
-
Future plans: Asset light projects costing 2500-3000 cr with Antara’s capital commitment of 130 cr
Locations: Gurgaon, Mumbai & Bangalore
2 Pilot Care Home centers launched. Based on their success, more centers will be launched. -
Max Bupa Divestment concluded in Dec 2019; Treasury position (Q3FY20): 516 cr
-
Care Home Centers (Premium & Economy/Value): Asset light (Buildings on Rental/lease basis??):
Future Planned Economics:
Steady state Revenue: 5 cr per center; EBITA: 15-18%
Investment: 3 cr per center
Break Even: From Year 2
Focus will be on specialized needs
Market Opportunity Size: $1 Billion [As per management]
Segment wise assets & Liabilities from Q1FY21 results:
Assets Liabilities
Senior Living 397 114.80
Business Invst 559 16.7
Learning & Dev 24 21.6
Others 2.4
Investment in JV 22
Unallocated 15 174
Total 1019 327.42
- Pledging: Max Ventures Investment Holding Pvt Ltd, which is promoter of Max India (also Max Ventures & Inds Ltd, Max Financial Services Ltd) pledged about 80% of their stake. This could be one major overhang for the share price in the current times, where the investors are scared of companies where promoters have pledged their shares.
In one of the articles, its reported that the promoter’s personal debt is about 3500 cr (at the end of 2019).
On the basis of information available on 1st Oct 2020, they have monetized their stake in Max healthcare (fully) & Max Financial services (about 6%) to raise 2000 cr. Promoters also mentioned (as per same article) that they have divested some real estate in UK to raise some cash (not quantified). I believe, they will monetize more stake in Max Financial Services to pare most of the debt.
Investment Thesis:
-
Real Estate: This will be bet on Real estate & niche senior living segment. The Dehradun project can be considered a failure, part of reason is management’s ambitious plans & other part could be general real estate slow down. The Noida project seems to be moderate success as of now. And needs to see how it progresses from here on.
Care Homes: Another good thing is the management is going slow on Care Homes by experimenting on pilot basis & asset light model.
At the moment, with the available details, there is lot of margin of safety built into the price for slow sales & early failure of Care homes.
Like Ashwin mentioned in his above post, there is a short term opportunity for 6% (16% acceptance ratio) - 12% (32% acceptance ratio) return in 6-8 months provided price does not go below 58 rs after investment :-).
100cr/310cr = 32.25%
Will keep adding the details as I get to know more things from past concalls and investor PPTs.
Discl: Invested & Biased (still in research mode & planning to increase);
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Hi, it seems the losses have widened in Q2? Is it largely from lower sales of their real estate units?
Yes. Max India seems to be available cheap due to couple of reasons:
- They are going to have unproven or unestablished business model (senior living as well as care homes), which may turnout to be full dud losing almost all the invested as well as “going to invest” capital.
- The 90% pledge by promoters.
Both the risks are genuine and could turnout to be true.
My guestimate is that
- due to consolidation (due to prolonged slump, Rera, covid etc) going on in real estate Branded players might be benefited. Buyers will think twice before buying under constructed house in non branded or bad brand houses.
- Interest rates are all time low, which will help the real estate sector in clearing inventory.
- The care homes, they are going in asset light, pilot model. If things go bad, management will stop burning cash sooner.
- Max india promoters seem to be paying off their debts by selling stake in max health care & max financials and other personal assets. So, pledging hangover might go away in an year or two
- Right now, I believe, losses are due to low Antara sales and high expenses in creating the real estate inventory & probably care home related expenses. So, hopefully, the sales momentum will turn up sooner as economy recovers and people start getting confidence back to buy houses.
We need to keep monitoring the losses & their affect on balancesheet. Unfortunately, the management did not share presentation during Q2FY21, which is bit concerning. The only comfort for me is margin of safety build into the current share price.
discl: Invested
I am novice in investing. Please don’t base your buy or sell decision based on my thought process.
Hi, thanks for the note.
Have been following this sector especially the retirement community sector. Have seen a few companies which have come out with models around the same( Kovai/ Columbia Pacific etc).
These are unlisted companies. These are “services segments” and hence their growth will be linear to the investments that they make.
Fairly high in demand services currently for a few segments of society ( Urban/ Children out of India segments). The key determinant for a good service is on how well the staff is treated and retained( especially the nursing staff).
The nursing staff has a huge demand
Disc: I am interested but not invested.
Looking at it frm arbitrage perspective, can someone confirm this : -
How mch will the mkt cap or book value of the co. reduce by once the capital reduction exercise will be completed?
My understanding is that the book value will be adjusted by 90 crs. i.e the amount which will be distributed back to shareholders, but as the co. is already selling at a 66% discount to book value, the market cap shouldn’t reduce by that mch.
In dat case, an IRR of 15% can be earned in 3 months with the optionality of remng gains frm reduction of discount P-to-BV.
Please correct if the understanding is wrong\missed somewhere.
The pledging of promoter shares has comedown drastically from > 90% to 6.24% ( 2.5% of overall equity).
Now is the turn for business to perform. Hopefully, the low interest rate environment helps real estate division (this effect seems not visible so far yet though) & management able to execute their plans in care homes division.
Disc: Invested
Reviving this thread. How does the company stands now?
MCap < cash in hand.
Dehradoon projects in place
Noida project selling fast more than 50% inventory sold in phase1 already.
Good name in hospital industry and revenue guidance in 2027 is 900 crores. 500 from services, 400 from Residencies.
Globally such companies are valued at 5x.
Understand that all will depend on execution, but does it make sense to hold it and watch the execution in play? Planning to take a position, seeking opinion if anyone knows the scope of this care home services?
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This thread is for Max India, and not Max healthcare
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