Business: Incorporated in 2000 and backed by Bessemer Health Capital and Investcorp, Medi Assist acts as a facilitator between insurance companies and their policyholders, insurance companies and hospitals, and the government and the beneficiaries of public health schemes. The company has over 26% market share in total premiums serviced by the TPA industry. It has a network of over 18,000 hospitals across 1,069 cities and towns in India. The company settled 3.05 million claims and serviced over 9,500 group accounts in FY23.
Medi Assist earns 3-3.5% fees on the insurance premiums serviced by it. For FY23, the company earned nearly 75% of its revenues from group insurance schemes – the fastest growing segment in health insurance – and roughly 11% each from retail and government-sponsored schemes.
Financials and Growth Prospects: Over the past three years, the company’s net revenues have increased from ₹323 crore in FY21 to ₹505 crore in FY23. The adjusted net profit doubled from ₹38 crore to ₹75 crore, with the operating margin maintained at over 23%. The return on capital employed improved from 20.4% to 25%.
Medi Assist has made five strategic acquisitions between 2016 and 2023. Its tech-enabled platform improves operational efficiency and productivity. It had 94% retention of all the group premiums serviced during FY23. One-time expenses related to legal and professional charges related to acquisitions and the impact of the consolidation of businesses led to a drop in the operating profit (Ebitda) margin for the first half of this fiscal.
Health insurance is the largest and fastest growing non-life insurance segment in India, poised to grow at a CAGR of 23% over the next five years, driven by high out-of-pocket expenses on healthcare and rising medical inflation. This is a key industry tailwind for the company.
Valuations: At an implied market capitalisation of over ₹2,876 crore, the IPO values the company at 34 times its annualised adjusted earnings of FY24 and nearly five times its projected FY24 revenues. It is premium pricing for the company given the growth prospects of health insurance in India and the TPA business being a steady-state fee-driven, tech-aided service business. The company has no listed peer. Investors interested in businesses sitting at the crossroads of healthcare and insurance can consider investing in this offer.