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Sagility India Ltd., a provider of technology-driven services in the healthcare industry, has commenced its initial public offering (IPO) on November 5th, 2024. The IPO, priced between ₹28-30 per share, aims to raise ₹2,106.60 crore through an offer for sale (OFS) of 70.22 crore shares by promoter Sagility BV. While the company secured over ₹945 crore from anchor investors, the initial response from the public has been sluggish, facing challenges in gaining traction. Despite this, the retail investor portion and the employee allocation have been fully subscribed.
The Bengaluru-based company's focus lies in providing technology-driven services to both payers (health insurance companies in the US) and providers (hospitals, physicians, and medical device businesses) in the US healthcare sector. Sagility's revenue and profit after tax (PAT) have demonstrated growth in the fiscal years ended March 31, 2023 and 2024, increasing by 13% and 59% respectively. However, the company's Red-Herring Prospectus (RHP) outlines several key risks that investors should carefully consider before subscribing to the issue.
The RHP highlights the intensely competitive nature of the healthcare services sector, emphasizing that Sagility's success hinges on its ability to compete effectively. A failure to compete could negatively impact the company's business, financial health, and operational outcomes. Another key risk is Sagility's exclusive focus on the US healthcare sector. The company is susceptible to negative impacts from factors affecting this industry, such as a slowdown in growth, decreased outsourcing, and emerging trends. Additionally, Sagility's significant reliance on goodwill and intangible assets for its value creates vulnerability. Any decline in these assets could negatively impact its reputation and financial health.
The company's operations, financial status, and ability to serve clients could be negatively impacted by legislation against outsourcing. Sagility's reliance on proprietary technologies, information, and intellectual property also presents a risk. Shortcomings in safeguarding these assets could lead to detrimental effects on the business, financial health, and operational results. Furthermore, the company's failure to meet contractual obligations could result in significant expenses or liabilities, negatively impacting its business, reputation, and operational outcomes.
Termination of agreements between Sagility and its clients could also negatively impact its business, reputation, and operational results. The company's reliance on a substantial portion of its revenue from specific large client groups in the US underscores the importance of maintaining strong relationships with these key clients for its business and profitability. If the company fails to secure new service engagements or experiences significant variations in business volumes, its ability to expand operations and increase revenue could be hindered.
Sagility's acquisition strategy for growth is another area of concern. If the company cannot achieve the expected benefits from acquisitions or faces delays or challenges in implementing its acquisition strategy, its growth, business performance, operational results, and future outlook could be negatively influenced. Investors seeking to participate in Sagility's IPO must carefully consider these risks before making an investment decision.
Source: Sagility IPO: 10 key risks investors should know before subscribing to the issue