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IPO-bound Vijaya Diagnostic looks to deepen presence in AP, Telangana and East India

Vijaya Diagnostic will be the second IPO of a diagnostic lab chain to hit the market in less than a month. Earlier this month Krsnaa Diagnostics IPO was subscribed 64.40 times. The price band of the offer has been fixed at Rs 522 to Rs 531 per equity share.

August 27, 2021 / 03:48 PM IST
 
 
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Vijaya Diagnostic Centre, whose initial public offering (IPO) will open on September 1, said the company will be focusing on deepening presence in Andhra Pradesh and Telangana, its core markets, and further expand operations in adjacent states and Eastern India with Kolkata as epicentre.

The integrated diagnostic chain said it will supplement organic growth with selective acquisitions in its focus markets.

"The key differentiator of Vijaya and from other diagnostic chains is the breadth of the offerings - we offer way more and higher because of the combination of pathology and radiology testing. That is also the reason why the per footfall revenue is the highest in the industry," said S Suprita Reddy, Chief Executive Officer of Vijaya Diagnostic, in an interview to Moneycontrol.

Vijaya has 11 reference labs and 81 diagnostic centres with a hub-spoke model mainly spread across Andhra Pradesh and Telangana and a small presence in Kolkata. Vijaya offers a comprehensive range of approximately 740 routine and 870 specialised pathology tests, as of June 2021.

"Revenue from 81 centres itself is about Rs 377 crore, which is a third or fourth of the large players with thousands of touchpoints. About 15-16 centres are located in tier-2 locations. In the core market of Andhra Pradesh and Telangana, the out of hospital market is worth around Rs 5,100 crore, we have just 7 percent market share, there is huge scope for growth,' Reddy said.

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She says the per footfall revenue of customers at Vijaya during the pre-COVID year of FY20 was around Rs 1,214, which is almost double of its peers.

Diagnostic industry second IPO

Vijaya Diagnostic will be the second IPO of a diagnostic lab chain to hit the market in less than a month. Earlier this month Krsnaa Diagnostics IPO was subscribed 64.40 times. The price band of the offer has been fixed at Rs 522 to Rs 531 per equity share.

The size of the IPO at the upper price band is Rs 1,895 crore. The offer will open on September 1 and close on September 3. Bids can be made for a minimum of 28 equity shares and in multiples of 28 equity shares thereafter.

The IPO comprises entirely an offer for sale of up to 35,688,064 equity shares, of which its promoter S Surendranath Reddy will be selling up to 5,098,296 equity shares, and PE investors Karakoram and Kedaara Capital will be selling 29,487,290 and 1,102,478 shares, respectively.

The shares of the company are likely to list on the stock exchanges on September 14.

Customer-centric model

Sunil Chandra Kondapalli, Executive Director of Vijaya Diagnostic, says the business model is different from Krsnaa which focuses on government contracts. In contrast, Vijaya gets over 90 percent of its revenues from walk-in customers.

He says this helps the company with better operational metrics, as it doesn't have to give cuts to doctors and hospitals. The earnings before interest, tax, depreciation and amortisation (EBITDA) of Vijaya stood at 44 percent in FY21, compared to 25-35 percent EBITDA margins of large peer companies.

The company's PAT rose 37 percent to Rs 84.90 crore in FY21 from Rs 62 crore in FY20 and revenue grew 9.7 percent to Rs 388.5 crore from Rs 354 crore in FY20.

On the asking valuation front which is considered expensive, Kondapalli said the issue is at discount to the valuations of larger companies.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Aug 26, 2021 07:54 pm
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