Nephrocare Health Services IPO: Top three key strengths and threats of the business

Nephrocare Health Services' IPO opened today for subscription for its ₹871 crore issue. The issue is a combination of ₹353 crore fresh issue and ₹517 crore offer for sale. The company raised ₹260 crore through an anchor book at the issue price of ₹460 apiece. The money raised will be utilised for capital expenditure of ₹129.11 crore towards opening new dialysis clinics in India. Repayment of borrowings worth ₹135.99 crore. Lastly, part of the IPO proceeds will be used for general corporate purposes.

The IPO is open for subscription from 10th Dec to 12 Dec with an issue price band of ₹438 to ₹460 apiece for the lot size of 32 shares. The company is the leading dialysis services provider in terms of patients served, clinics, cities covered, and treatments, revenue and EBITDA as of FY25.

Strengths

The company is the largest dialysis service provider in India and Asia in FY25, with its scale being 4.4x bigger than the next largest Indian organised provider by operating revenue in FY24. It holds over 50% market share of the organised dialysis market in India in terms of both treatments and revenue, and ranks 5th globally by treatments in FY25. Its network delivered 18.7 lakhs treatments as of September 30, 2025 and spans 21 States + 4 UTs with 77.35% of clinics in Tier II/III cities.

It is the only Indian dialysis chain with an international scale, generating 31.79% of revenue from overseas markets in FY25 versus 11.70% in FY23. In the Philippines, the company acquired 18 entities and expanded to 41 clinics serving 2,276 patients by September 30, 2025, while it also operates in Uzbekistan and Nepal. A USD 75+ million PPP tender in Uzbekistan includes the world’s largest 165-bed dialysis clinic, anchoring a long-term contracted business stream.

The company has scaled from one clinic (2010) to 519 clinics across 328 cities by Sept 30, 2025, through greenfield, brownfield and PPP modes, with 52.41% clinics under revenue-sharing, reducing capital intensity. Its initiatives towards reducing capital expenditure include standardised clinic formats, an in-house projects team, and an efficient supply chain.

Risks

Public-private partnership (PPP) clinics are awarded via competitive tenders with strict compliance requirements, making revenue streams vulnerable. PPP operations accounted for 30.96% in H1FY26, 32.62% in FY25, increasing from 22.39% in FY23, with risks of non-renewals and price-driven margin pressures. 4 PPP tenders were not renewed in recent years, demonstrating vulnerability to contract-based disruptions.

**Execution risk in the expansion strategy **

The company has expanded its operations in Nepal, the Philippines and the Republic of Uzbekistan in the H1FY26 and the last 3 years. Revenue from outside India surged from 11.70% in FY23 to 39.96% in H1FY26, creating heightened exposure to foreign regulatory, operational and demand risks as the company enters new markets with limited brand familiarity.

The company’s revenue is significantly concentrated in captive clinics located within partner hospital premises, exposing it to contract renewal and partner dependency risks. These clinics contributed 36.51% of revenue for H1FY26, 43.30% in FY25, 51.96% in FY24 and 62.23% in FY23. Non-renewal incidents are rising, with 4 cases in H1FY26, 1 in FY25 and 3 in FY24, highlighting increased risk of revenue loss as partner hospitals shift to operating their own in-house dialysis clinics.