Last updated on September 4th, 2021 at 08:31 am
After Krsnaa Diagnostics, Vijaya Diagnostics (the Issuer) is coming up with IPO size of Rs 1894 crore; the offer opens on 1st Sept 2021. The Issuer offers comprehensive and high-quality diagnostic services in India through its own operational network, comprising of a flagship centre, hub centres and diagnostic centres as well as reference laboratories.
The IPO is purely an offer for sale and there is no fresh issue.
Offer Size, Price Band and IPO open dates and IPO close dates and market lot size of Vijaya Diagnostics IPO are as follows:
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| Offer Details | |
| Offer Size | Rs 1862- Rs1894 crore |
| of which | |
| Fresh Issue | NIL |
| Offer for sale | upto 3,56,88,064 equity shares |
| Reservation for eligible employees | upto 1.5 lakh equity shares (approx Rs 7.05-7.19 crore) (Employee discount of Rs 52 per share) |
| Price Band | Rs 522- Rs 531 per share |
| Offer Period | Sept 1- Sept 3, 2021 |
| Offer Structure | QIBs: upto 50% of the offer NIIs: upto 15% of the offer RIIs : upto 35% of the offer |
| Market Lot | Minimum 1 lot; 28 shares Maximum 13 lots; |
| Listing on | BSE, NSE |
| BRLM’s | ICICI Securities, Edelweiss Financial Services, Kotak Mahindra Capital |
| Registrar | Kfintech |
Business Profile of Vijaya Diagnostics
Vijaya Diagnostics offer pathology and radiology testing services through an extensive operational network, which consists of 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana and Andhra Pradesh and in the National Capital Region and Kolkata as on June 30, 2021. For the three months ended June 30, 2021, and for FY21, 95.91% and 96.20% of the revenue from operations was derived from core geographies, Hyderabad and the rest of Telangana and Andhra Pradesh, respectively.
The company offers a comprehensive range of approximately 1,610 pathology tests, which are organised into approximately 740 routine tests and 870 specialized tests, as well as approximately 220 basic and 320 advanced radiology tests that cover a range of specialities and disciplines, as of June 30, 2021.
The customer base comprises of:
(i) customers who visit diagnostic centres and avail services as per the price list;
(ii) customers whose samples are collected at their residence and processed;
(iii) customers who avail services on the basis of discretionary discounts provided by as part of the various marketing and other initiatives; and
(iv) customers who are employees of Government companies or are covered under Government initiatives or are beneficiaries of life/health insurance policies and choose to undergo tests at diagnostic centres.
As of June 30, 2021, two of the diagnostic centres, laboratories and business premises are owned by Vijaya Diagnostics and the remaining 79 diagnostic centres are on lease. On August 11, 2021, the Issuer purchased land measuring 1,654 square yards in Himayatnagar, Hyderabad for consideration of Rs 35 crore with the intention of developing a diagnostic centre at this location.
Key Financial Highlights of Vijaya Diagnostics IPO
- Total revenues increased by 10% to Rs 388 crore for FY21 from FY20. The increase was mainly due to the increase in the number of covid RT PCR tests and commencement of operation of 7 new diagnostic centres.
- Vijaya posted PAT of Rs 84 crore in FY21 as against Rs 62 crore in FY20, registering a rise by 35%. The increase is a combination of an increase in revenues and decrease in certain costs.
- Vijaya Diagnostics posted PAT of Rs 33 crore (Rs 1.8 crore in Q1FY22) on revenues of Rs 125 crore (Rs 51 crore in Q1FY21) for Q1FY22. Revenue increased due to increase in volume of tests and footfall count.
- The Issuer has robust profitability margins. The margins are plotted in the chart.
- Vijaya has negligible debt on the balance sheet. The company has huge cash reserves.
- The Issue is valued at 42 times its earnings; with EPS of 12.92 (annualised) and calculated at the upper price band of Rs 531 per share. Average Sector P/E is 90.8 x which indicates that the Issue is attractively priced. P/BV is 13.78x with NAV of 38.53 per share as on 31st June 2021.
Valuation Parameters
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| Valuation Parameters | EPS | P/E | NAV | P/BV |
| 12.92 | 41.09 | 38.53 | 13.78 |
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Conclusion and Investment strategy
Currently, the Issuer has robust fundamentals with strong profitability margins , strong RoNW and is a debt negligible company. Vijaya is a cash surplus company and plans to expand using its reserves. However, there are certain risks attached which are
Scalability Risk– The Issuer predominantly operates in southern India, hence if it diversifies into other states, it may impact its margins.
Competition Risk– The diagnostics industry in India is highly competitive and fragmented. Standalone centres dominate the Indian diagnostic market with approximately 45% to 50% market share, while hospital-based centres have approximately 35% to 40% market share for FY20. Diagnostic chains have approximately 12% to 17% market share for FY 20 and are further split into regional and multi-regional chains.
It should also be noted that the offer is entirely an offer for sale hence private equity investor and Kedara capital would exit from the company, retaining only 10%.
Krsnaa Diagnostic which operates on a PPP business model had a tepid listing recently though it also had good profitability margins though they are not comparable on an apple to apple basis.
Considering the positives and the negatives of the Issuer, and the fact that the pandemic has bought these companies into the limelight, it might be possible that the boom in this sector is a temporary phenomenon so an investor may avoid this IPO, however, if one wishes to enter only for the listing gains should wait and watch the grey market premium for a couple of days and invest only on the last day of the offer. The grey market premium is weak at Rs 30 per share over the offer price lately.
Subscription Status of Vijaya Diagnostics
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| Subscription Status {no. of times (x)} | ||||
| Particulars | Shares Offered | 1st Sep | 2nd Sep | 3rd Sep |
| QIB | 71,07,613 | 0.23 | 0.32 | 13.07 |
| NII | 53,30,710 | 0.01 | 0.05 | 1.32 |
| Retail | 1,24,38,323 | 0.46 | 0.74 | 1.09 |
| Employees | 1,50,000 | 0.24 | 0.52 | 0.98 |
| Total | 2,50,26,646 | 0.30 | 0.47 | 4.54 |
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Vijaya Diagnostics Centre Limited IPO Important Dates
| IPO Allotment and Listing | |
| Basis of Allotment | 08-Sep-21 |
| Refunds | 09-Sep-21 |
| Credit to Demat Account | 13-Sep-21 |
| Listing Date | 14-Sep-21 |
Promoter Group
Dr S. Surendranath Reddy is the Promoter of our Company. The Promoter holds 38,521,195 Equity Shares, aggregating to 37.78% of the pre-Offer issued, subscribed and paid-up Equity Share capital of the Company.
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