Forthcoming

Vijaya Diagnostic Centre Limited IPO

Initial Public Offer

 

Vijaya Diagnostic Centre was incorporated in 2002, and is the largest integrated diagnostic chain in southern India. Vijaya Diagnostic provides integrated services of pathology and radiology and offers around 740 routine tests, 870 specialized pathology tests, 220 basic tests, and 320 advanced radiology tests. Vijaya diagnostic network consists of 80 diagnostic centers and 11 reference labs across 13 cities. Companies 81% of revenue comes from Hyderabad.

Issue Details

  • Issue Open: September 01, 2021
  • Issue Close: September 03, 2021
  • Face Value: Rs 1
  • Present Eq. Paid up Capital: Rs 53 Cr
  • Issue Size: Rs 1,894** Cr
  • Offer for Sale: Rs 1,894** Cr
  • Price Band: Rs 522 – 531
  • Lot Size: 28 shares and in multiple thereafter
  • Expected Listing : 14th September 2021
  • Employee Discount – Rs 52 per share
  • Post-issue mkt. cap: * Rs 5323 Cr – ** Rs 5,414 Cr
  • Promoters holding Pre-Issue: 37.78%
  • Promoters holding Post-Issue: 32.7%

Positives:

(a) Fastest growing diagnostic chain with a dominant position in south India. Between 2017 and 2020 volume of tests has grown by15% while volume of patients has grown by 14%.

(b). The Company provides Integrated diagnostic services of pathology & Radiology under one roof.

(c). Company has a very high brand recall in its core market of Hyderabad and derives 92% of its revenues from the high margin B2C business.

Investment concerns:

(a) Company has a very high concentration toward one city with Hyderabad accounting for 81% of the revenues. Increase in competition in the main market can impact growth as well as EBITDA margins.

(b) In FY2021 company had got some benefits due to increase in Covid related tests, which is not expected to continue in the future and can have an adverse impact on the volume growth of the company.

(c) Low promoter holding will also be an issue for the company as post IPO promoter holding will be relatively low at 32.7%

Outlook & Valuation:

Based on FY2021 numbers, IPO is priced at a Price to Earnings of 64.3 times and EV/EBITDA of 30 times at the upper price band of the IPO, which is in line with the listed peer group. Company already has a higher market share in key geographi like Hyderabad and we do not expect the covid related benefit to continue in coming years. We believe that at ₹531, all the near term positives are priced in and leaves limited upside for the investors. Hence, we are assigning a “NEUTRAL” recommendation to the Vijaya Diagnostic centre limited IPO.

Company background

Vijaya Diagnostic Centre Limited was incorporated on June 5, 2002. Vijay Diagnostic is the largest integrated diagnostic chain in southern India, by operating revenue, and also one of the fastest-growing diagnostic chain by revenue for fiscal year 2020.

Vijaya offers an one-stop solution for pathology and radiology testing services to their customers through their extensive operational network, which consists of 80 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana; Andhra Pradesh.

Vijaya offers a comprehensive range of approximately 740 routine and 870 specialized pathology tests and approximately 220 basic and 320 advanced radiology tests that cover a range of specialties and disciplines, as of June 30, 2021.

Company provides value-added services such as home collection of specimens, house calls and various delivery or access modes (i.e., at diagnostic centres, SMS, email and web portal) for test reports. They have implemented a ‘hub and spoke’ model, whereby specimens are collected across multiple locations within a catchment area or a region for delivery to their reference laboratories for diagnostic testing.

Issue details –

The issue comprises of offer for sale of upto  Rs1,894 crore (3.56 crores shares) with the price band of Rs 522-Rs 531.

 Objectives of the Offer  

To carry out the Offer for Sale of up to 35,688,064 Equity Shares by then Selling Shareholders.

Achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Vijaya Diagnostic Centre was incorporated in 2002, and is the largest integrated

diagnostic chain in southern India. Vijaya Diagnostic provides integrated services

of pathology and radiology  and  offers around 740 routine tests, 870 specialized

pathology  tests,  220  basic  tests,  and  320  advanced  radiology  tests.  Vijaya

diagnostic network consists of 80 diagnostic centers and 11 reference labs across

13 cities. Companies 81% of revenue comes from Hyderabad.

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