Sagility IPO: 10 key risks investors should know before subscribing to the issue

Sagility IPO: Sagility India Ltd, which provides technology-driven services in the healthcare industry, has opened its public subscription today (Tuesday, November 5) and will close on Thursday, November 7. The issue, priced between ₹28-30 per share, announced on Monday that it has secured over ₹945 crore from anchor investors. On the initial day of bidding, the response has been somewhat sluggish as the issue faces challenges in gaining traction. There has been strong participation from retail investors, and the portion allocated for employees is already fully subscribed.

The Bengaluru-based company's initial public offering consists entirely of an offer for sale (OFS) of 70.22 crore shares from promoter Sagility BV, which is valued at ₹2,106.60 crore at the peak of the pricing range. As this offering is an OFS, the company will not receive any funds from the public offering; all earnings will be directed to the selling shareholders.

As stated by the company, the aim of this initial share sale is to leverage the advantages that come with having its equity shares listed on stock exchanges.

The firm provides technology-driven services to both payers (health insurance companies in the US that cover and reimburse health service costs) and providers (primarily hospitals, physicians, and businesses associated with diagnostic and medical devices).

Sagility India Limited's revenue climbed by 13% and profit after tax (PAT) increased by 59% during the fiscal years ended March 31, 2024 and March 31, 2023.

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

Sagility IPO - Key Risks

• The healthcare services sector is extremely competitive, and if they cannot compete successfully, it could negatively impact their business, financial status, and operational outcomes.
• The company concentrates exclusively on the US healthcare sector and could face negative impacts from factors influencing this industry, such as a slowdown in its growth, decreased outsourcing, and other emerging trends.
• Goodwill and various intangible assets represent their most significant assets. Any decline in the value of their goodwill or other intangible assets could negatively impact their reputation and financial health.
• Legislation against outsourcing could negatively impact their operations, financial status, and ability to serve their clients.
• Any shortcomings in safeguarding their proprietary technologies, information, or intellectual property could lead to detrimental effects on their business, financial health, and operational results.

• If the company does not provide services that meet the contractual obligations, they may face considerable expenses or liabilities, which could negatively impact their business, reputation, and operational outcomes.
• If the agreements between the company and its clients are ended, it could negatively impact their business, reputation, and operational results.
• Since a considerable part of their revenue comes from certain large client groups in the US, their business and profitability depend heavily on maintaining strong relationships with these key clients.
• If the company fails to create new service engagements, or if their business volumes vary significantly, it could negatively impact their ability to expand operations and increase revenue.
• If the company cannot achieve the expected benefits from acquisitions, or if they face delays or other challenges in executing their acquisition strategy for growth, it may negatively influence their growth, business performance, results of operations, and future outlook.

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