I have been following Kovai and so far I have really liked the business. Some of the things I like about Kovai are the negative working Capital, cheap valuation for a hospital and the stable margins. Debt has been the major concern so far. The shares of the hospital are not very liquid. Its very difficult to buy even a small amount of shares. Debt is no more an issue as the medical college is functioning well and all the seats are filled up every year. Free cash flow can easily service the debt. Debt is also reasonably priced.( around 7.4% as per AR 22, must be at MCLR). There was some interest capitalisation but as per AR 22 the amount of interest capitalised in FY 21 -22 is 60.84 lakhs against 5004.15 lakhs in the previous year. So capitalisation of interests would have significantly decreased. Company doesn’t have much institutional followers. It is good to see promoters buying ( though not much). But my concern is with the cash flow. It will be great if anyone has any idea. As per the cash flow statement they have spent 127 crores in the last FY on purchase of fixed assets.
Does anyone has any idea on this? Is this maintenance capex? Or should we wait till AR to get clarity on this. There is a CWIP of 23 crores in the balance sheet.
Promoters are making small buys from the market as well. I would really like to know more about its cash flow.
Discl: Invested.
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