MedPlus Health Services lists at 30% premium, what should investors do now?

Medplus Health Services IPO

 The country’s second largest pharmacy retailer, MedPlus Health Services listed on Thursday with a decent premium of 31 percent.

The stock opened on the BSE at Rs 1,040, higher than the issue price of Rs 796 per share.

The initial public offering (IPO) had seen a healthy response from investors and was subscribed about 53 times during December 13-15. The portion set aside for qualified institutional buyers was booked 112 times and that of non-institutional investors was subscribed 85 times.

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The portion reserved for retail investors and employees was subscribed 5.23 and 3.05 times, respectively.

The pharmacy retailer has mobilised Rs 1,398 crore from its public issue, which comprised a fresh issue of Rs 600 crore to be used for working capital requirements of its subsidiary Optival Health Solutions.

At 11:43 hours, the stock was up 38 percent at Rs 1,100 on the BSE.

Should investors hold on to the stock or book profit? Here’s what analysts are saying:

Rajnath Yadav, research analyst, Choice Broking

We had assigned a “subscribe” rating for the issue. The company is into the organised pharmacy retail market in India. In FY21, penetration of the organised pharmacy retail market at a pan-India level was estimated to be around 11%, which is low compared to the penetration in developed economies and in China. Thus, there is immense growth potential in the organised pharmacy market. MedPlus, being the second largest pharmacy retailer, is expected to benefit from the expansion in the market.

After the strong listing, we recommend short-term investors exit, while long-term investors can hold on to the stock.

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Ajit Mishra vice-president (research), Religare Broking

The listing has been decent and long-term investors can continue to hold. For fresh buys, one can wait as we may see a dip due to the prevailing corrective phase in the market.

Akhilesh Jat, pharma analyst, CapitalVia Global Research

We believe investors with a long-term perspective should stay put due to the company’s strong brand name and it being the second-largest pharmacy retailer in India.

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Santosh Meena, head of research, Swastika Investmart

Long-term investors should hold the stock because it could turn into a wealth creator in the next two to three years. However, short-term investors are advised to keep a stop loss of Rs 875.

MedPlus has an omnichannel platform and is the second-largest pharmacy retailer. We believe the growth opportunities from the industry will justify the company's valuation in the long run, even if it appears to be expensive at first glance.

Also read: Infosys shares hit record high at Rs 1,860, stock up 47% this year

Prashanth Tapse, vice-president, research, Mehta Equities

Healthy listing gains seem to be justified even though the issue was aggressively priced considering its pan-India business network and diversified range of products and business model, including pharmaceutical, wellness products and fast-moving consumer goods, giving strong long-term visibility.

Overall, we believe Indian organised retail pharmacy is still at a nascent phase and expect exponential growth in the long run.

Swapnil Shah, head of research, BP Wealth

The company has delivered solid financial performance and plans to further strengthen its market position by increasing store penetration. We suggest the allotted investors to hold this stock for the long term, while others can look to make fresh entries on dips.

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