Read the entire thread and found quiet a useful information about the company. Here is how I will value the company.
Lease rental business is earning a post tax profit of 28 Cr as per the quarterly standalone results. This can be capitalized at 7% giving a valuation of 400 Cr. Underlying land is valued at 588 Cr but I am not sure if this was a truly independent valuation. Lease rent is 44 Cr per year and that works out to be 0.75% of the value of the land. Considering prime location of the land, it appears to be low so I think the 588 Cr is on the higher side. It is reasonable to assume that lease rental business is worth 400 Cr or less.
Current market cap of the company is 950 Cr so market is giving a valuation of 550 Cr to the hospital business. This is a 400 odd bed operation generating 400 Cr revenue and 22 Cr profit as of FY16.
ROE of the business is low and as pointed out @ayushmit, it may improve over the next 2-3 years. However, given the trend in the revenue, I think the hospital could be operating at a high occupancy rate so further utilization driven efficiency looks limited.
Market is assigning a valuation of 1.25 Cr per bed which looks fairly valued as cost of setting up a new hospital is in that range. Here is a text from Narayana Hrudayalaya IPO prospectus.
Kovai is also planning to set up a 300 bed hospital in Chennai for 300 Cr (including land cost). However this estimate is 3 year old so cost would have gone up now. This is an estimate for a metro similar to NCR/Gurgaon.
Regarding the expansion of 200 beds, I don’t see any capital work in progress so I think it is at a planning stage and not yet reflected in the balance sheet. Company is still paying down the debt so I don’t think they are planning for an immediate expansion. If anyone has some concrete information about the expansion plan please point out.
A 200 bed hospital will also need almost 200 Cr of funds. Given than company earns 22 Cr of PAT in FY2016, they won’t be able to do it without debt and additional equity.
company earns 400 Cr from 400 beds or about 1 Cr per bed per year. Assuming 85% occupancy, it works out to be 32k per day. I am not an expert but this looks a little on the higher side to me. Kovai is less than half of that in a non-metro location.
Given the low ROE and fair valuation I will give it a pass for now. Will wait for a sell off (if any) to enter. Moreover, I am really not interested in the lease rental business. I will rather buy the hospital business after it gets listed.