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An in-depth look at Sagility India's upcoming IPO, its business model, financial performance, and growth potential.
Founded in 2000 as part of the Hinduja Global Solutions (HGS) healthcare division, Sagility India became an independent entity in January 2022 after its separation from HGS, supported by EQT Private Capital Asia. Sagility specializes in providing technology-driven business solutions and services to clients in the U.S. healthcare industry, with a focus on both healthcare insurers (payers) and providers.
IPO Date: November 5, 2024 to November 7, 2024
Listing Date: [To be announced]
Face Value: ₹10 per share
Price Band: ₹28 to ₹30 per share
Lot Size: 500 Shares
Total Issue Size: 702,199,262 shares (aggregating up to ₹2,106.60 Cr)
Offer for Sale: 702,199,262 shares of ₹10 (aggregating up to ₹2,106.60 Cr)
Employee Discount: ₹2 per share
Issue Type: Book Built Issue
IPO Listing: BSE, NSE
Shareholding Pre-Issue: 4,681,328,413
Shareholding Post-Issue: 4,681,328,413
Sagility offers comprehensive services across two primary segments: Services for Payers and Services for Providers.
Sagility plays a crucial role in managing daily administrative functions for health insurers. Key functions include claims management, enrollment, benefits planning, premium billing, credentialing, and provider data management. This segment also covers payment integrity, ensuring seamless operational efficiency.
Sagility supports insurers in delivering enhanced healthcare outcomes through utilization management, care management, and population health management. Additionally, Sagility provides pharmacy benefit management (PBM) services, working with pharmacy managers to handle prescription drugs for insured members.
Sagility’s Revenue Cycle Management (RCM) segment aids healthcare providers by improving their financial operations, enabling efficient revenue collection. Key services include financial clearance, medical coding, billing, and accounts receivable management.
Sagility’s business is significantly concentrated in the U.S. market, drawing on a diverse talent pool from five global delivery locations: India, the Philippines, the U.S., Jamaica, and Colombia. As of FY24, the company derived 90% of its revenue from payers and 10% from providers.
With over 105 million claims processed and 75 million member interactions in FY24, Sagility’s established relationships include long-standing clients, with the top five clients averaging 17 years of service.
Sagility’s average client tenure of 17 years demonstrates robust client trust, especially among top U.S. health insurers.
Sagility’s strong financials indicate a solid cash-generating capability. In FY24, it converted nearly 87% of EBITDA into cash, with a free cash flow of ₹973 crore.
Sagility’s diversified workforce from India, the Philippines, and Latin America provides a cost-effective delivery model, enabling it to serve major U.S. healthcare providers and insurers.
Priced attractively at approximately 20x PE and 13x EV/EBITDA, Sagility stands well-positioned against peers like Medi Assist and FSL, which are trading at higher multiples (55x and 50x respectively).
Sagility’s FY24 revenue grew by 13%, and PAT margins rose by 57% compared to FY23, reflecting strong operational growth. With solid EBITDA margins of around 23-25% and PAT margins near 12%, Sagility’s operational efficiency is noteworthy. Although Q1 FY25 saw a minor margin dip due to adjustments, these had no significant financial impact.
Sagility has a debt of approximately $110 million, which it plans to repay in installments by FY27, ensuring steady cash flow without excessive leverage.
The U.S. healthcare industry is valued at over $4.7 trillion, a market size exceeding India's GDP, underscoring the vast potential for companies like Sagility. With its established expertise and long-standing client relationships, Sagility is well-positioned to capture growth in this highly lucrative sector.
Sagility relies on its top three clients for 68% of its revenue. While this concentration could pose a risk, Sagility’s longstanding client relationships help mitigate potential volatility.
Sagility inherited certain liabilities and litigations post-separation from Hinduja Global. However, bank guarantees have been provided, shielding the company from significant exposure to these risks.
Sagility’s valuation is attractive, especially when compared to its peers. With a PE ratio of around 20x and an EV/EBITDA multiple of 13x, Sagility offers room for potential growth, making it an appealing option for long-term investors.
Sagility’s IPO offers a unique entry point into the U.S. healthcare services market, especially for investors seeking exposure beyond just listing gains. With a strong financial base, well-established client relationships, and significant growth prospects, Sagility appears to be an investment worth considering for the long term.
If you’re primarily interested in long-term portfolio growth, Sagility’s fundamentals make it a promising choice. Investors looking solely for short-term listing gains may prefer to wait for final QIB subscription data to make a decision.
Disclaimer: This analysis is for educational purposes only. Please conduct your own research before investing.
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