MedLife BVB performance highlights potential of Romania’s emerging capital market

MedLife could not have become the market leader had it not decided to go public, according to Mihai Marcu, the president and CEO of the 28-year-old private medical services company that started trading on the Bucharest Stock Exchange (BVB) in 2016. MedLife’s successful Initial Public Offering (IPO) came after eight years of zero private listings on the stock exchange, showcasing the capacity of Romanian entrepreneurial firms to attract both domestic and foreign investors and accelerate the growth of the local private sector.

By Ovidiu Posirca

For the past seven years, MedLife has continued its rapid growth as a public company, with its turnover having grown fourfold since 2016, making it the first private medical services operator to cross the EUR 400 million turnover threshold.

Romania’s capital market gaining regional prominence

In an interview with BR, Mihai Marcu was very bullish about Romania’s economic potential. He believes the capital market will play a major role in the country’s development and regional dominance in the coming years.

“Romania is on track to become the most important economy in the region by far, and it has numerous listed companies that have an opportunity to become regional leaders. In fact, MedLife’s own stock exchange investors and other funding partners are expecting the company to expand internationally,” says Marcu, who has been at the helm of MedLife since 2004, after spending 11 years in the banking system.

The growth of the BVB has accelerated in recent years: by early 2023, there were 371 companies listed on the main and AeRO markets. Furthermore, the local capital market has attained emerging status based on the FTSE Russell, with MedLife included in this index alongside 12 other firms. Since it was founded in 1995 with nine listed companies, the BVB has gained visibility among investors and entrepreneurs, with more companies tapping into the capital market as a solid funding channel.

As of April 10, BVB’s main market had 83 companies with a combined capitalisation of RON 208 billion (around EUR 42 billion), with more than half of the volume generated by the financial, energy, and utilities sectors. Meanwhile, the 288 listed companies on the AeRO market had a capitalisation of around RON 14.5 billion (close to EUR 3 billion).

“Over the past 4-5 years, the capital market has grown significantly in terms of the number of listed companies and IPO interest—and it is set to continue on this path,” says the executive.

The upward trend is also reflected by the number individual investor accounts, which had climbed to 132,000 at the end of last year. Representatives of the BVB are eyeing a target of 500,000 accounts by the middle of this decade. Marcu suggests that the country’s investment culture is also an important factor when it comes to assessing the outlook for the local market.

“For instance, it is very easy to invest in the capital market in the US, while in Japan, which is also an advanced economy, it is very difficult to do so. Culture also plays a role, and Europe tends to move more slowly on this topic,” he explains. Nevertheless, Romania’s expanding middle class is increasingly sophisticated when it comes to capital market investments.

To really emerge, our capital market needs to encourage the IPO of public sector companies, as well as a greater awareness of the benefits of stock exchange investments, Marcu argues, adding that listed public sector companies of the likes of Romgaz and Electrica have much better corporate governance compared to their pre-IPO period. “For a public company, this kind of performance can be measured transparently through indicators, and individuals can buy shares in these firms.”

Marcu also points out that the pension funds under Pillar II are crucial for the overall health of the capital market. “Pension Pillar II is one of the strongest reasons for Romania to become an emerging capital market in the region. (…) It is the first time in Romania’s history when it has a chance to become a regional force, and the capital market is a major component of this opportunity.”

At a regional level, the BVB has one of the highest market capitalisations, which came close to EUR 30 billion at the end of 2022, behind the Warsaw and Vienna Stock Exchanges, each with a capitalisation of over EUR 100 billion. The domestic capital market is already ahead of the markets in Prague, Budapest, and Zagreb, according to official data from BVB and Refinitiv.

Advice for companies preparing to go public

Marcu had been thinking about the listing of MedLife for two-three years prior to its IPO, but the formal process was kicked off in 2015. His first piece of advice for any entrepreneur thinking of taking their company public is to begin to undergo financial audits—if not with Big 4 firms, then with lower-tier consultants— in order to get used to complex financial assessments.

“In my view, it is useful to do it for about 2-3 years before an IPO—and there are plenty of entrepreneurs in Romania who are ready to adapt to such requirements. The listing of a company takes 6-9 months, so there is time to prepare from an auditing perspective,” says Marcu, adding that MedLife, had been working with a Big 4 firm for a full decade before its listing.

The company’s management approach is also a crucial aspect once it goes public, and Marcu says there are two ways to go about it.

“I believe that when a company goes public, it either needs to build a strong financial team in order to keep its founder as CEO, like we did, or hire a professional CEO with market exposure who has cashflow on their mind at all times. The fact that I had a financial background did help me at that point, but I don’t think this factor is that important for firms looking at an IPO now,” he argues. Marcu became a bank vice president at 29 years old, managing asset-liability committees (ALCO) and interest rate policies.

He also challenges the misconception that a public company is encumbered by the stricter regulatory framework, pointing out that companies can actually gain more visibility from a wider array of investors through a listing.

“It was a game changer for me to realise that listing and the associated transparency do not represent restraints, but even greater freedom. Large institutional investors will understand your company better, including its requirements, and they’ll stand by you,” says the CEO, adding that he has shared this with the founders of ten other companies that are now public, who visited him for advice before initiating their IPO procedures.

“During a crisis, a listed company has the capacity to lend from the market—not just from creditors or through bond issuance, but also by issuing shares and consolidating the business. This is an essential element for a public company,” Marcu notes.

The first essential piece of advice he has for entrepreneurs who are thinking of an IPO is, “don’t promise more than you can deliver.”

Second, he says there should be “no sudden movements,” underlining the fact that it is important to maintain a high level of transparency for the board and management committee.

Third, he stresses the importance of communication: “A firm that wants to do more than just pursue profit should repeat this at every meeting. It might say that it’s skipping dividend payments because it wants to develop—or the other way around. This also sets expectations for investors on the market.”

Fourth, firms should be careful about their reporting practices and leave no room for doubt on their acquisitions, hirings or large contracts.

And finally, Marcu says that the company’s relationship with analysts is highly strategic, as they have an important role to play on the capital market.

“They issue forecasts on potential share prices and they need data to create their models, which they collect from investor calls, quarterly reports, and face-to-face conversations with management at least once a year. Messaging regarding a company’s future and long-term stability should be delivered directly, at the highest level. At MedLife for instance, I have repeatedly said that we would not pay dividends if we deliver growth of at least 10 percent each year. This provides guidance for investors so they know where they’re placing their money.”

Finding the power to dominate PE-funded competitors

Going public helped MedLife maintain its leading market position, as it went against two private equity funds—one Swedish, and the other one Polish—that own two other major private medical operators in Romania.

“The private equity funds have brought in hundreds of millions of euros, and only a public company can hope to be able to compete with such strong funding,” Marcu says. MedLife has achieved its success with a Romanian management team and a large share of domestic capital; one third of the company’s capital comes from foreign investors that have put their trust in its vision.

“This is a story of success in Romania, with a local company simply dominating the competition against four or five companies that are pumping hundreds of millions of euros into the market. This might be my biggest source of pride as an individual. We could not have done it without this listing and the trust from investors,” the executive points out.

MedLife’s listing also brought new institutional investors to the market, who specialised in the healthcare sector. The model could be replicated by companies in other industries as well, and they could attract sovereign funds such as the ones in Norway or Kuwait, which have capital allocations for different industries.

“In Romania, we’ve recently seen more listings of companies in the real estate and communications sectors, which can attract specialised or portfolio-driven investments. For example, I believe that Hidroelectrica will attract massive investments because it specialises in green energy. What’s certain is that each listing brings more foreign capital and more competitive firms to Romania. Moreover, our stock exchange investors are starting to better understand the market consolidation process and becoming more aware of what M&A entails,” Marcu explains.

Ultimately, the MedLife executive believes that transparency and governance are core elements that public companies should always be striving to strengthen. He adds that “listed companies must exercise great regulatory care, because if one of them were to have a serious governance fault at some point, it would impact the stock exchange on the long term.”

Hidroelectrica’s IPO will be this year’s highlight for the BVB, and it could mobilise more listings of private companies in the next year. Companies raised EUR 1.9 billion from bond and stock sales during 2022, once again highlighting the market’s overall growth potential.

MedLife’s stock exchange journey in numbers

MedLife became a public company through a high-profile IPO that successfully closed in 2016, and it has continued to deliver growth across the board since then. One year after its listing, the medical services company was included in the reference BET index of the Bucharest Stock Exchange; in 2022, MedLife was included in FTSE Russell’s Emerging Markets indices.

The company became the first private medical services operator in Romania to exceed an annual turnover of EUR 400 million. MedLife’s vision is to develop large scale medical hubs in major Romanian cities and offer integrated services, while also investing in digitalization and innovation.

The MedLife network at a glance

The company is the largest employer in the local medical sector, with more than 10,000 employees and collaborators, of whom 4,500 are doctors, according to data from December 2022.

200 collection centres
205 clinics, microclinics, occupational health centres
34 medical labs
27 hyperclinics
23 pharmacies
18 dental centres
16 hospitals
6 COVID labs
4 maternity hospitals
1 stem cell bank

6 million – the number of unique patients
800,000 – the number of MedLife subscribers
600,000 – the number of investigations processed monthly
30,000 – the daily number of patients using MedLife’s services
98% – the share of MedLife suppliers who are Romanian

Financial highlights

Assets rose 4.6 times from 2016 to 2022, reaching RON 2.15 billion
Turnover increased fourfold from 2016 to 2022, reaching RON 2 billion
EBITDA rose 5.2 times from 2016 to 2022, reaching RON 284 million

Yield performance

Since its IPO, the company’s capitalisation grew 4.65 times, which translates into an yield of 365 percent, outpacing the growth of the BET-TR index, which includes dividends and had a yield of 178.7 percent.

Capital market evolution

MedLife is the 13th biggest company on the BVB by market capitalisation, which reached RON 2.4 billion at the end of 2022
MedLife is the seventh most traded company on the BVB
In 2022, MedLife got the maximum score (10/10) for its communication with investors, based on ARIR’s VEKTOR index

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