Vijaya Diagnostic Centre (after this referred to as ‘The Company’) got incorporated in 2002 as a private limited company. However, the operations date back to 1981, when the promoter opened the first diagnostic centre in Hyderabad. The company is coming up with an IPO that opens for subscription on September 1, 2021. Here is all you would like to know about Vijaya Diagnostic Centre IPO.
- Largest integrated diagnostic chain in Southern India measured by the revenue
- The company offers a one-stop solution for pathology and radiology testing services
- Vijaya has an extensive operational network of 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana, Andhra Pradesh, National Capital Region and Kolkatta as of June 30, 2021
- Core geographies, i.e. Telangana and Andhra Pradesh, contributed to over 95% of revenues
- Individual consumers contribute to 92-93% of the revenues
- The company offers approximately 740 routine and 870 specialized pathology tests. Further, it conducts 220 basic and 320 advanced radiology tests
Key company strength areas
- Most prominent and fastest-growing diagnostic chain with a dominant position in Southern India
- The company is well-positioned to benefit from the growth in the diagnostic industry
- An integrated diagnostic services provider that offers a one-stop solution at affordable prices
- High brand recall in core geographies
- Experienced management team
About the promoter
Dr S. Surendranath Reddy, the Executive Chairman, is also the promoter of the company. A radiologist himself, he is a first-generation entrepreneur. Dr Reddy has over four decades of experience in the integrated diagnostics business.
Below is the condensed financial information:
Comparison with other industry peers
- The average industry PE is 90.8x
|Offer for sale (35,688,064 equity shares)||Rs 1,895 Cr|
|Gross issue size||Rs 1,895 Cr|
Utilization of proceeds:
- The company will not receive any funds from the IPO proceeds
We expect the Indian diagnostics industry to grow solid over the next few years. This growth will be on account of rising health awareness, growing disposable income, increased demand for better healthcare facilities, and higher spend on preventive care and wellness.
The offer proceeds will go to selling shareholders. In other words, the company will not get any funds to carry out expansion or reduce its financial liabilities.
At the upper end of the price band, the company P/E will be 64.3x vs the industry average of 90.8x. The other competitors like Dr Lal Path, Metropolis, SRL, Thyrocare are all national players and therefore demand a certain premium in pricing.
The company has delivered moderate revenue growth and margins over the years. The offer price fully factors in its financial performance. However, the company’s revenues are highly concentrated in Southern India. And, loss of business in that region can significantly impact its future performance.
Further, the poor listing of Krsnaa Diagnostics recently will have a bearing on this issue as well. In conclusion, we recommend that the investors invest in other established multi-region diagnostic players if they must invest in this sector.
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
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