IPO

Sagility India provides technology-enabled business solutions and services to clients in the US healthcare industry. It is a pure-play healthcare focused services provider, and its clients include payers (US. health insurance companies, which finance and reimburse the cost of health services) and providers (primarily hospitals, physicians, and diagnosticand medical devices companies).

Sagility supports the core business of both payers and providers. Services to payers span their entire operational spectrum, including centralized claims administration and clinical services functions. These include claims administration, payment integrity, clinical management and other services. For providers, the company offers revenue cycle management services to assist them in managing their billing and claiming treatment costs from payers. In addition, the company also offers some of the services it provides to payers to pharmacy benefit managers (PBMs) who manage prescription drug coverage for members under health benefit plans.

In FY 2024, Sagility helped its payer clients process 105 million claims and handle over 75 million member and provider interactions. In FY2024, the company earned 90.3% of its revenues from payers and 10.7% of its revenues from providers.

Sagility was incorporated on July 28, 2021, and it acquired the healthcare services business of Hinduja Global Solutions (HGS) and its subsidiaries in 2022. Subsequently, the company acquired the subsidiaries in March 2024.

Object of the offer

The offer for sale by the selling shareholders comprises up to 70,21,99,262 shares by Sagility BV (Holding company).

The company will not receive any proceeds from the offer and all the offer proceeds will be received by the selling shareholders Sagility BV.

Strengths

The company has become one of the largest tech-enabled healthcare specialists (by revenue) with coverage across payer and provider markets, by building out its end-to-end portfolio of services in the outsourced operations market for both payers and providers. Within the healthcare operations outsourced market, the company had a share of approximately 1.18% and approximately 1.23% in 2022 and 2023 respectively. Further, the company has been recognized for the quality and scale of its services by industry experts. The company was ranked as a Leader by Avasant in their clinical services business process transformation RadarView report 2023 and as a Leader in Everest's Healthcare payer operations PEAK Matrix Assessment 2023.

The pure-play nature of its business, together with the business' experience and the effective use of technology, has helped the company build domain expertise in its operations which in turn has helped the company build comprehensive technology-based solutions in the areas of utilization management, payment integrity and elderly care, and tools and platforms that target functional improvements in a number of areas that include claims, provider data management and member engagement as well as contextualize its digital solutions like robotic process automation (RPA), analytics and AI.

The company's suites' are scalable with technology-enabled solutions and services. These are further supported by proprietary tools and platforms.

Sagility has an established track record of providing business process management (BPM) servicesto the healthcare sector in the US, serving both the payers and the providers. The company's services are diversified across the value chain of the payer life cycle and provider network, which include voice work, member enrolment, claim processing, analytics, clinical, revenue management, population health and payment integrity, among others.

The company has a reputed clientele in the health insurance sector, including leading health insurance companies in the US. SIL serves to top US-based healthcare insurance firms, among other Fortune 500 companies, with some of whom it shares more than decade-long relationships.

Sagility has offshore delivery centers in India, the Philippines, Jamaica, and Colombia and an onshore presence in the US serviced by 35858 employees. Its global delivery presence has helped to tap into a wider talent pool, providing timely service to clients, leading to revenue growth.

Weaknesses

The company operates in the healthcare service industry which is highly competitive. The company faces competition from healthcare specialists, broad based IT and business services firms and product focused companies specializing in providing products or solutions for healthcare industry. Such competition may lead to pricing pressure and other adverse impacts.

The company's business is solely focused on the US healthcare industry and may be adversely affected by factors affecting the US healthcare industry, including a decline in the growth of the US healthcare industry, reduction in outsourcing and other trends.

The company recorded significant goodwill and intangible assets at the time of acquisition of HGS. Any impairment to its goodwill or other intangible assets may adversely affect the financial condition of the company. Goodwill and intangibles as on June 30, 2024, stood at Rs 5679.26 crore and Rs 1966.99 crore, respectively.

Shares of Sagility BV (promoter of the company) held by Sagility Holdings BV are pledged for external financing facility availed by the promoters. In case of an event of default and consequent invocation of security, there may be a change in control, which may adversely impact the company's business.

Any failure to protect the company's proprietary technologies or information or its intellectual property rights may have an adverse effect on the company's business.

Revenue growth might be adversely affected if the company cannot keep pace with technological changes, sufficiently invest and successfully yield the intended results from its investments in technology, in case of any errors or system disruptions in its technology tools and platforms, or if its services arerendered obsolete by technological developments.

The company operates in the BPM services industry, which is characterized by continual wage increases and high attrition rates, its profitability remains exposed to fluctuations in hiring/ training costs for its employees.

Outstanding legal proceedings against the subsidiary of the company stood at Rs 985.28 crore as on June 30,2024.

Valuation

For the three months ended June 2024, consolidated sales were up by 9.6% to Rs 1223.33 crore. The OPM declined 778 bps to 15.85%, which led to a 26.45% decrease in operating profit to Rs 193.95 crore.Other income increased 113.11% to Rs 24.43 crore. Interest cost declined 20.64% to Rs 37.37 crore and depreciation declined 33.8% to Rs 109.99 crore. PBT increased by 14.71% to Rs 71.01 crore. Tax expenses increased by 151.0% to Rs 48.72 crore. Net profit stood at Rs 22.29 crore as against net profit of Rs 42.50 croreinthe corresponding period of the previous year.

For FY 2024, consolidated sales were up by 12.7% to Rs 4753.56 crore. OPM declined 146 bps to 22.89%, which led to a 5.9% increase in operating profit to Rs 1088.09 crore. Other income increased 58.3% to Rs 27.95 crore, while interest cost declined 13.8% to Rs 185.15 crore and depreciation increased 7.0% to Rs 689.21 crore. PBT increased by 30.2% to Rs 241.68 crore. Tax expenses decreased by 68.1% to Rs 13.42 crore. Net profit stood at Rs 228.27 crore as against net profit of Rs 143.57 crore in FY2023.

In March 2024 and May 2024, the company issued 2,36,66,10,429 and 39,39,91,918 equity shares, respectively, to holding company Sagility BV at Rs 28.3 per equity share.

At the higher price band of Rs 30, the offer is made at a P/E of 61.5 times FY2024 EPS (EPS of Rs 0.5).

Given the company's a healthcare-only focus across the payer and provider markets, there are no listed service providers in India or abroad that cater to US healthcare enterprises and are comparable to the company.

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