Paras Healthcare Targets 1.15x Debt-Equity Through IPO

Paras Healthcare Limited plans to direct Rs 375 crore of fresh-issue proceeds towards repaying debt, projecting consolidated borrowings will fall from Rs 888.89 crore on June 30, 2026 to Rs 513.89 crore after the offer. Paras Healthcare also projects its debt-equity ratio will decline from 2.00 times to 1.15 times.

How will Paras Healthcare use Rs 375 crore for debt repayment?

Paras Healthcare expects to deploy Rs 375 crore from net proceeds towards debt repayment or prepayment in fiscal 2027. The deployment schedule allocates Rs 320.90 crore to repayment or prepayment of certain company borrowings and Rs 54.10 crore to its wholly owned subsidiary, PMHPL, for repayment or prepayment of the subsidiary’s borrowings. The board approved the issue objects on October 14, 2026.

The fresh issue has planned gross proceeds of Rs 500 crore, subject to full subscription, making the scheduled Rs 375 crore debt allocation equal to 75% of gross proceeds. The objects summary separately lists Rs 320 crore for company borrowings and Rs 54.10 crore for PMHPL, while the implementation schedule lists Rs 320.90 crore and Rs 54.10 crore respectively. Paras Healthcare’s post-offer borrowing estimate uses the Rs 375 crore scheduled allocation.

The debt funding is separate from the offer for sale, from which Paras Healthcare will receive no proceeds. The offer for sale includes up to Rs 300 crore by Dr. Dharminder Kumar Nagar and up to Rs 650 crore by Commelina Ltd, with proceeds payable to those selling shareholders after their respective offer expenses and taxes.

What debt reduction does Paras Healthcare project after the IPO?

Paras Healthcare projects that debt repayment will reduce total consolidated borrowings by Rs 375 crore, from Rs 888.89 crore at June 30, 2026 to Rs 513.89 crore after the offer. The estimate adjusts only for the proposed use of net proceeds for debt repayment and prepayment, rather than for future operating cash flows, refinancing or changes in equity.

The company defines total borrowings as non-current borrowings plus current borrowings, including current maturities of non-current borrowings. At June 30, 2026, non-current borrowings were Rs 459.36 crore and current borrowings were Rs 429.53 crore. The stated post-offer figure therefore measures reported consolidated fund-based borrowings after the identified debt use.

PMHPL had outstanding fund-based borrowings of Rs 64.34 crore at June 30, 2026. Paras Healthcare plans to provide PMHPL an unsecured Rs 54.10 crore loan at 9.65% interest for five years, with repayment over five years following an initial 10-year moratorium. PMHPL operates Paras Healthcare’s Srinagar hospital.

Why is Paras Healthcare prioritising debt repayment over other uses?

Paras Healthcare is prioritising debt repayment because Rs 375 crore is specifically scheduled for company and subsidiary borrowings, while the general-corporate-purpose allocation remains unfinalised. Under the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, general corporate purposes cannot exceed 25% of the Rs 500 crore gross proceeds, or Rs 125 crore.

The company may use the residual general-corporate-purpose amount for organic or inorganic growth, capital expenditure at existing and upcoming hospitals, working capital, marketing, salaries, taxes, administration and other board-approved requirements. However, Paras Healthcare states that this allocation cannot be used for either of the two identified debt-repayment objects.

Paras Healthcare will select facilities for repayment based on borrowing costs, interest rates, prepayment restrictions, lender consents, penalties, outstanding balances and remaining loan tenor. The company has obtained applicable lender consents or no-objection certificates for the company borrowings proposed for repayment. The actual loans repaid may differ from indicative facilities if balances change or loans are repaid or refinanced before allotment.

How has Paras Healthcare’s debt profile changed before repayment?

Paras Healthcare’s total consolidated borrowings rose by Rs 138.88 crore to Rs 888.89 crore on June 30, 2026 from Rs 750.01 crore on June 30, 2025. Non-current borrowings increased by Rs 34.64 crore over the year, while current borrowings increased by Rs 104.23 crore. The projected Rs 375 crore reduction is greater than that Rs 138.88 crore year-on-year increase.

The debt-equity ratio declined to 2.00 times on June 30, 2026 from 2.15 times on June 30, 2025, despite the increase in total borrowings. Paras Healthcare defines debt-equity as total debt divided by total equity in its restated consolidated financial information. The projected 1.15-times figure depends on the disclosed debt repayment adjustment being completed.

Debt servicing costs, defined as interest costs plus principal repayment costs, were Rs 34.98 crore for the three months ended June 30, 2026, compared with Rs 29.13 crore for the three months ended June 30, 2025. For fiscal 2026, debt servicing costs were Rs 129.20 crore, up from Rs 99.77 crore in fiscal 2025.

What could affect Paras Healthcare’s deleveraging plan?

Paras Healthcare expects nil scheduled deployment for the two debt objects in fiscal 2028 after the planned fiscal 2027 use. If proceeds remain unused during those periods, the company may use the balance in fiscal 2029 in accordance with applicable law. Funds still unused by fiscal 2029 would constitute a variation in the objects and require shareholder approval.

The company says the deployment schedule is based on management estimates, prevailing market conditions, interest rates, financing agreements and business requirements. No bank, financial institution or independent agency has appraised the objects. If net proceeds do not cover prepayment penalties, accrued interest or related costs, Paras Healthcare says it will use internal accruals for the shortfall.

CARE Ratings Limited, a Securities and Exchange Board of India-registered credit rating agency, has been appointed to monitor gross-proceeds utilisation quarterly until it is complete. Its mandate includes monitoring PMHPL’s use of the subsidiary loan. Pending deployment, Paras Healthcare says net proceeds will be deposited only with scheduled commercial banks included in the Second Schedule to the Reserve Bank of India Act, 1934.

Conclusion

Paras Healthcare’s planned fresh-issue deployment is principally a balance-sheet exercise, with Rs 375 crore scheduled for debt repayment across the company and PMHPL. The company projects that this use will reduce consolidated borrowings to Rs 513.89 crore and bring debt-equity to 1.15 times from 2.00 times at June 30, 2026.

The next points to watch are the final net proceeds after offer expenses, the facilities ultimately selected for repayment and completion of the fiscal 2027 schedule. Paras Healthcare has disclosed that unutilised amounts may move to fiscal 2029, while repayment choices can change with lender approvals, outstanding loan balances, penalties and financing conditions.