NSE offers health providers avenue to cure money woes

Metropolitan Hospital in Nairobi. Photo/FILE

By EDWARD OMETE
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Summary

• Metropolitan Health Services was inducted into the Nairobi Securities Exchange’s (NSE's) Ibuka segment.
• Ibuka, (Kiswahili for emerging) is an incubation sandbox geared towards accelerating the number of businesses listing on the NSE, which has undergone a lengthy drought.
• The event in itself, is important for two reasons: one, it is the first time that a mainstream health enterprise will feature on NSE, if the deal does go through.

Amid the festivities, a piece of news in the dailies may have passed many with interest in the health sector: private player, Metropolitan Health Services was inducted into the Nairobi Securities Exchange’s (NSE's) Ibuka segment. Ibuka, (Kiswahili for emerging) is an incubation sandbox geared towards accelerating the number of businesses listing on the NSE, which has undergone a lengthy drought.

The event in itself, is important for two reasons: one, it is the first time that a mainstream health enterprise will feature on NSE, if the deal does go through. And two, it will be notable if the player intends to follow through with a listing.

For those not in the know, Metropolitan Health Services MHS was part of enterprises acquired by private equity firm Abraaj Capital a year or so ago. This was prior to the PE fund's reconstitution following concerns with its main backer on possible breach of investment terms.

MHS operates Metropolitan Hospital in the city's Eastlands area, which has been in existence for a while and is currently on a services expansion. The induction's significance, is that it answers a question many potential investors in health enterprises ask. How do I get my returns?

Exits, are easily the biggest topic fundraising investor face, away from the short-term ROI, given hospitals' lengthy break-evens. Hopefully, if successful to main segment listing, it will create a template other private health entrepreneurs can follow in their growth quest.

Typically, listings can see founders cash out on their equity, realise a businesses' market worth, or fundraise for expansion. The last point, coming particularly at a time when heightened completion amongst medical franchise operators is raging. Erstwhile standalone hospitals are being forced to incorporate outpatient satellite units for efficiency and proximity to their clientele.

Currently, five of the top 10 medical franchises are on an expansion spree that will see close to 200 new outlets opened in the next few years. Anticipated heightened competition, will particularly see tier three and two franchises move upwards, shaking up the existing status quo. In all, it promises an exciting decade of private providers' realignment.

The other significance of the announcement, is that Ibuka offers cash constrained businesses with promising futures an opportunity to access funds subsequent to listing, through rights calls. For health enterprises, patient capital has been a tough call for many players.

At the moment, close to 18 percent of your hospital bill has a bank loan repayment component. Translating to higher charges and perhaps locking out some patient segments from accessing healthcare. Hopefully the NSE avenue can unlock a route for our businesses to tap shareholder capital as equity compared to bank loans.