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Medplus Health Services trades at double-digit premium in grey market ahead of listing day

Medplus Health Services IPO | The company is commanding a premium of around 23 percent at Rs 180 a share

December 22, 2021 / 11:12 AM IST
Representative image

Representative image

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India’s second-largest retail pharmacy chain Medplus Health Services Ltd (Medplus) makes it stock market debut on December 23 after its Rs 1,398-crore initial public offering (IPO) got a good response from investors.

The IPO, which was open for subscription from December 13 to 15, was subscribed 52.59 times. The company had fixed the offer price at Rs 780-769 a share of face value Rs 2 each.

The overwhelming response to the offer was complemented by a higher premium the company commanded in the grey market in the early days. The premium on December 13 stood at Rs 300 a share but has since eroded to Rs 180 on December 22, as per IPO Watch that tracks grey market prices for companies due for listing.

The grey market is an unofficial trading platform where shares get traded well before the allotment in an IPO and listing on bourses.​

Experts say though the fundamentals of the company remain intact, the decline in the grey market premium is due to the negative sentiment surrounding equity markets following the omicron scare and central banks’ hawkish stance.

They, however, expect that the share to list with a gain of 30 percent at a listing price of Rs 1,000-1,050, which “safe investors” can use as an opportunity to exit.

The IPO got bids for 66.13 crore equity shares against the IPO size of 1.25 crore equity shares, generating demand for shares worth Rs 52,645 crore. The company raised Rs 1,398 crore through its public issue at the upper price band of Rs 796 a share.

Qualified institutional investors bought shares 111.89 times their allotted quota and portion set aside for non-institutional investors was subscribed 85.33 times, The demand from retail investors and employees were also strong as their reserved portion were subscribed 5.23 times and 3.05 times.

The company on December 10 mopped up Rs 418 crore from 36 anchor investors by allocating 52,51,111 equity shares at the upper end of the price band of Rs 796. The marquee investors included Abu Dhabi Investment Authority, Blackrock Global Funds, Nomura, Fidelity Investment Trust, Goldman Sachs, Morgan Stanley, Wasatch International Opportunities Fund, Carmignac Portfolio, and CI Asian Tiger Fund.

Domestic investors like HDFC Trustee, Aditya Birla Sun Life, SBI Mutual Fund, Nippon Life, Kotak Mutual Fund, Motilal Oswal Mutual Fund, HDFC Life Insurance, ICICI Prudential Life Insurance, SBI Life Insurance, and Edelweiss also invested in the company.

The company has a retail network of over 2,000 stores distributed across Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal and Maharashtra, as of 31 March 2021.

For FY2021, the average revenue per store stood at Rs 1.6 crore, as compared to the average revenue per store in the domestic pharmacy retail industry of approximately Rs 0.23 crore.

For FY21 and the six months ended September 30, 2021, its store level operating EBITDA margin for mature stores was 11 percent and 11.58 percent, respectively, and its store level operating return on capital employed (ROCE) for mature stores forFY21 was around 60 percent.

Gaurav Sharma
first published: Dec 22, 2021 11:12 am