The IPO of Vijaya Diagnostic Centre, one of the largest integrated diagnostic chain in South India, has so far received muted response from investors as it was subscribed 47 percent on September 2, the second day of bidding.
The public issue has received bids for 1.18 crore equity shares against offer size of 2.50 crore equity shares, the subscription data available on the exchanges showed.
Retail investors have put in bids for 74 percent of their reserved portion and that of employees 52 percent of their portion. A part set aside for qualified institutional buyers was subscribed 32 percent and that of non-institutional investors 5 percent.
Vijaya Diagnostic Centre has a dominant market share and brand recall in the Telangana and Andhra Pradesh. After starting in 1981, the company has 81 diagnostic centres in 13 cities/towns. It has 7 percent share in Telangana and Andhra non-hospital diagnostic market.
Promoted by S Surendranath Reddy, promoters own 60 percent stake while rest is owned by private equity firm Kedaara Capital. After offer for sale, Kedaara would own 10 percent shareholding in the company.
The company aims to raise Rs 1,895 crore through its public issue. Of which, it already mopped up Rs 566 crore from anchor investors at upper price band of Rs 531 per share on August 31, a day before issue opening.
It is a complete offer for sale by promoter and investors, so all the money raised from public offer will go to selling shareholders.
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"At a post-issue market cap of Rs 5,410 crore, offer for sale is priced at around 64x FY21 P/E. On a forward basis, a steady growth and margin profile would translate in to valuation which would be at a marginal discount or in line with the 55-60x FY23 multiples commanded by Dr Lal PathLabs and Metropolis Healthcare," said Yes Securities.
The brokerage further said, "Vijaya owns a retail footfall-driven business which would take time to scale up in newer geographies but then precludes pricing pressure due to lack of a sizable B2B business. We note that other listed peers like Dr Lal PathLabs and Metropolis Healthcare have a significant B2B presence. Also, there appears to be a lot of scope to grow market share in existing markets given the large potential."
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Yes Securities recommended to subscribe the issue on a medium term basis though cognizant that near term triggers or surprises on growth after a Covid-fueled Q1FY22 appear unlikely.
Vijaya Diagnostic has delivered 13 percent CAGR revenue growth from FY19 to FY21 and is expecting to grow considerably faster than the industry average of 10-12 percent.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.