Krsnaa Diagnostics Limited (after this referred to as ‘The Company’) commenced its operations in 2010. The company provides a wide range of technology-enabled diagnostics services, including imaging (radiology), pathology/clinical laboratory, and tele-radiology services. The customers include public and private hospitals, medical colleges and community health centres across India. Krsnaa Diagnostics is coming up with an IPO, which opens for subscription on August 4, 2021. Here is all you would like to know about the Krsnaa Diagnostics Limited IPO.
- Krsnaa focuses on the public-private partnership (PPP) diagnostics segment and has a significant presence in the diagnostic PPP segment. Further, the PPP agreements are long-term in nature and lend predictability to the revenues
- As of June 2021, the company has deployed 1,797 diagnostic centres per the PPP agreements with public health agencies (contributing to 67% of revenue in fiscal 2021)
- In collaboration with private healthcare service providers, the company operates 26 diagnostic centres as of June end
- Krsnaa Diagnostics also has an integrated diagnostic centre network of 1,823 centres across 13 states in India
- The tests cost less at Krsnaa in comparison to charges of select peers. The company associates itself with quality diagnostic and healthcare at affordable rates
PPP is a significant revenue contributing segment for the company. Here is the market landscape within this industry segment:
Key company strength areas
- Presence in the PPP segment of healthcare services is positive, as that represents a vast market opportunity
- Krsnaa Diagnostics provides a wide range of technology-enabled diagnostic services. In the PPP segment, the company engages with central, state and municipal agencies
- Brand equity – Krsnaa associates itself with providing quality and reliable healthcare services at affordable prices
- An extensive network spread across 13 states in India, and presence over 1,800 locations
- High revenue visibility as an outcome of long term PPP agreements. The contracts with public health agencies range between 2-10 years, with an extension clause included
About the promoter
Mr Rajendra Mutha, promoter and executive chairman and whole-time director, has considerable industry experience. He is associated with the company since its inception.
Below is the condensed financial information:
Comparison with other industry peers
Average industry P/E of 86x
|Fresh issue||Rs 400.0 Cr|
|Offer for sale (85,25,520 equity shares)||Rs 813.3 Cr|
|Gross issue size||Rs 1,213.3 Cr|
Utilization of proceeds:
- Finance the cost of establishing diagnostics centres at Punjab, Karnataka, Himachal Pradesh and Maharashtra (Rs 151 Cr)
- Repayment/prepayment, in whole or part, of borrowings from banks and other lenders (Rs 146 Cr)
- General corporate expenses
The rise in literacy rates, better life expectancy, and higher disposable income lead to higher demand for better healthcare services. Therefore, we have witnessed a constant increase in the volume of in and outpatients over the years.
Further, growing urbanization and routine changes have led to lifestyle-related disorders. These have prompted demand for enhanced offerings by medical service providers, especially in metros and Tier I/II cities. Therefore, we expect the diagnostic industry to grow healthy over the coming years, and Krsnaa will benefit from the same.
In addition, Krsnaa’s presence in the PPP segment of healthcare services is advantageous. Given the track record, there exists a significant growth opportunity for the company in this segment.
However, considering the financial performance, we believe the issue is highly-priced. Therefore, there is risk attached to the IPO at this offer price. In conclusion, we recommend that investors with high-risk appetite to consider investing in this IPO, while others may avoid.
The information provided in the red herring prospectus filed by the company with the Securities and Exchange Board of India (www.sebi.gov.in) is the basis for this note. However, I recommend that the reader validate the data before making any financial decision. Also, investment in an initial public offering (IPO) is subject to market risks. Therefore, it should be evaluated, keeping your risk profile and investment objective in mind. The author will not be responsible for any financial loss or otherwise resulting from any action taken based on the above.
About the author
The author is a senior finance professional with over fifteen years of work experience in corporate finance. He has an affinity for matters relating to personal finance and investment management. Through his writing, the author wants to share his knowledge and understanding of the subject.
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