Narayana Health: The Initial Public Offering Decision
(7 pages of text)
Case (Pub Mat)
Narayana Health, an Indian private healthcare provider, was established with the aim of providing affordable healthcare services without compromising quality. Over the years, its growth and expansion was financed by private equity investors. In August 2015, private equity investors of the company decided to go public through the offer for sale route. Private equity investors had to decide the value of the initial public offering (IPO) and whether the time was appropriate for Narayana to go public. To do so, they needed to consider the company’s financial performance, the pros and cons of the company’s strategy and business model, the industry’s future growth potential, and macroeconomic factors.
This case was written to help students understand different motives behind going public. It discusses different choices for raising capital and documents the methods commonly used in the industry for valuing companies in order to arrive at an appropriate offer price band. The case requires students to arrive at a suitable share price by considering the financial performance of the company, pros and cons of the company’s strategy and business model, the industry’s future growth potential, and macroeconomic factors. It also provides insights about IPO underpricing, a commonly observed phenomenon across markets. After working through the case and assignment questions, students will be able to
- understand the process of equity issuance in India;
- understand the valuation of an initial public offering (IPO) using discounted cash flow (DCF) and multiples methods; and
- explore the concept of IPO underpricing and post-IPO stock performance.
Health Care Services
India, Large, 2015
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