Religare Health Trust (RHT) will raise $416 million from its initial public offering in Singapore after fixing the price at S$0.90 per share.
With one day to go of the institutional bookbuilding, the bookrunners told investors that the deal was likely to price around the mid-point, but the final price is actually more towards the low end of the S$0.88 to S$0.97 range. Sources said the issuer could have priced higher, but decided to be generous as it is very keen for the stock to trade well.
RHT, which manages a portfolio of hospitals and is listing as a business trust, is scheduled to start trading on October 19.
One source noted that some investors, while they would have stayed in at a higher price, had made it clear that they preferred a lower one.
The final price will result in an annualised yield of 8.95% for the fiscal year to March 2013 and approximately 9.1% for fiscal 2014. The sponsor, India-listed hospital operator Fortis Healthcare, has waived its rights to a dividend in these first two years, which will increase the payout to other investors. Without this waiver, the yield in fiscal 2013 and 2014 would only have been 6.4% and 6.6% respectively.
Fortis Healthcare will own 28% of RHT at the time of listing and has committed not to sell any units during the first six months and no more than 50% of its total holdings during the following 12 months. RHT is selling the remaining 72%, or 567.455 million units, to institutional and retail investors.
The institutional offering attracted about 140 investors during the one-and-a-half weeks of bookbuilding and was said to have been about three times covered. In addition to the usual long-only funds, the buyers included real estate specialists, event-driven funds and insurance companies, as well as hedge funds and private banks.
Long-only institutions were prioritised when it came to allocations and about 70% of the deal went to just 30 investors, the source said.
Approximately 80% of the demand came from Hong Kong, Singapore and the rest of Southeast Asia, complemented with some orders from Europe.
RHT didn’t sign up any cornerstone investors before launch, but the bookrunners did have strong indications of demand from a group of anchor investors, which for Singapore IPOs is almost the same thing as cornerstones don’t have to commit to a lock-up. The only key difference between a cornerstone and an anchor investor is that the latter isn’t made public in the prospectus.
RHT is only the second Indian listing on the Singapore Exchange after Indiabulls Properties Investment Trust (IPIT), which started trading in mid-2008 after raising $193 million from an IPO. In July this year, Reliance Communications tried to list its subsea cable unit as a business trust in Singapore, but that deal was pulled after failing to get enough demand. The unit, named Global Telecommunications Infrastructure Trust (GTI Trust), was aiming to raise between $700 million and $1 billion.
RHT is also the second-largest listing in Singapore this year after Far East Hospitality Trust, which raised $527 million through an IPO in mid-August, and pretty much confirms that this is a year when yield is a strong theme among new listings in Singapore. The three biggest IPOs so far have all been Reits or business trusts and yesterday bankers kicked off the bookbuilding for Dynasty Reit, which is the first IPO in Singapore to feature a tranche denominated in offshore renminbi alongside the usual Singapore dollar offering.
RHT will give investors exposure to India’s fast-growing healthcare sector, which is driven by a growing need and demand for healthcare services, an increasing ability by the growing middle class to pay for medical services, and a market that is under-served by public healthcare facilities.
However, it doesn’t operate most of the hospitals in its portfolio itself. Rather, its key business is to invest in, develop and manage a number of healthcare assets, including clinics and hospitals, which are then operated by Fortis Healthcare. In return, RHT receives a basic fee plus a share of the revenues at each of the assets.
The portfolio currently consists of 11 “clinical establishments” that all have hospitals that are operated by Fortis Healthcare, two hospitals that it operates on its own and four greenfield clinical establishments. The assets have a combined value of between S$748 million ($620 million) and S$781 million, based on estimates by two separate valuers.
Fortis Healthcare, which is 81.5%-owned by entities linked to its promoter, Religare Enterprises, has a track record of more than 10 years of hospital operations and acquisitions. It currently has a network of 75 hospitals with more than 12,000 beds across 10 countries in the Asia-Pacific region.