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Last Updated : Oct 17, 2012 12:32 PM IST | Source: CNBC-TV18

Accumulate Dr Agrawals Eye at currrent levels: Chugh

Ashish Chugh, Investment Analyst advice small investors to accumulate Dr Agrawals Eye at current levels.

Ashish Chugh, Investment Analyst advice small investors to accumulate Dr Agrawals Eye at current levels.

Chugh told CNBC-TV18, “Dr Agrawals Eye Hospital, first a sign of caution it is an illiquid stock and this not meant to be a trading stock but this is a stock which is meant for small investors to be accumulated on bad days of the market. I believe this is a stock where there is deep value coupled with high growth potential. This is a business model which has got huge scale up potential.”

He further added, “Dr Agarwal operates as a chain of eye hospitals and eye clinics. They are primarily based in South India, and have clinics in Tamil Nadu, Karnataka and few clinics in Rajasthan and Orissa also. In total they operate about 45 eye clinics as of today. Going to the financials, the FY12 sales were about Rs 100 crore and profit after tax was Rs 1.6 crore and depreciation was about Rs 5.7 crore which means a cash profit about Rs 7.5 crore. The stock currently trades at about Rs 90 and has market cap of just about Rs 40 crore at the current market price. There is a lot of interest from private equity players in the health care space and we have seen a few deals particularly in the eye care segment happening in the last couple of years. Vasan Eye Care which is an unlisted company had offered 15-18 percent equity stake to private equity players and that values Vasan Eye Care at about Rs 3000 crore. Again recently we are hearing news about a Delhi based company called Centre for Sight giving a 15% stake to Matrix Partners for about Rs 150 crore, which values Centre for Sighte at about Rs 1000 crore.”

“These two companies are unlisted company and we don’t have the exact financials of these companies but whatever I have learned from my sources is that Vasan Eye Care is a company which is about 5-6 times the size of Dr Agarwal and the Centre for Sight which is almost similar to size of Dr Agarwal. Talking particularly about Dr Agarwal, the promoters few months back consolidated all their holdings into one entity which led to the promoters giving a open offer to the minority shareholders. That open offer came at about Rs 160 against that the stock is currently available at Rs 90; promoters were able to increase their holding from 58 to 78 percent pursuant to that open offer. The promoters had recently consolidated all their holdings into a holding company call Dr Agarwal Healthcare Limited. Recently they have given a 25 percent stake in Dr Agarwal Healthcare to private equity player for Rs 60 crore. Now this values Dr Agarwal Healthcare at about Rs 240 crore, and since Dr Agarwal Healthcare owns 75 percent of Dr Agarwal’s Eye Hospital. This values the company at about Rs 320 crore.”

“At the current price, the market cap of the company is about Rs 40 crore. What the company is going do with Rs 60 croe which has got infused into their parent company is they want to have a pan India presence and in times to come we will see that the number of centres, which the company operates they will increase. Looking from all angles, I don’t see too much of risk at the current market cap of Rs 40 crore. Even though I am not fully aware about the detailed financials of the other players which I talked about but looking from risk angle and also from the margin of safety which it provides at the current market price, I think in a few years time this stock may be at a totally different kind of a level.”

Disclosures: I and my family have investments in both the companies.

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First Published on Oct 17, 2012 11:19 am
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