Vijaya Diagnostic IPO: The IPO of Vijaya Diagnostic Center Limited (VDCL), the largest integrated diagnostic chain in South India, has opened for subscription today on September 1. Before the opening of this IPO, the company has raised Rs 566.12 crore from 29 anchor investors. The company has allotted 1,06,61,418 shares to these investors at a price of Rs 531. Anchor investors include Goldman Sox, CLSA, Fidelity International and Abu Dhabi Investment Authority. This IPO of Rs 1894 crore is open for subscription till 3 September and for this a price band of Rs 522-531 per share has been kept. Brokerage firms have mixed opinions on subscribing to this IPO.
Choice Broking: Avoid
- VDCL has presence in both Diagnostic and Radiology segment but its piers are only in Diagnostic business.
- The company does not have a pan-India presence and has around 95 per cent of its business in Andhra Pradesh and Telangana, while Pierce has a presence in several regions.
- VDCL has maximum number of walk-in customers as compared to its own piers i.e. without pre-booking.
- The diagnostics sector has strong growth potential with better cash flow. However, despite this, due to rising healthcare costs, the pressure on the profit of this sector has increased.
- At Rs 531 in the upper price band, Vijaya Diagnostics has a P/E of 47x which is similar to the Pierce average. With this, there are signs of the company’s IPO being fully priced. In such a situation, investment in it should be ‘avoided’.
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- Based on FY21 EPS (earnings per share) at the upper price band, the company may list at a P/E of 64.3 as against the industry average P/E of 90.8x.
- Between FY 2019 and FY 2021, the company’s operating revenue grew by 13.5 per cent, EBITDA by 23.9 per cent and PAT (Profit After Tax ie Net Profit) at a CAGAR (Compound Annual Growth Rate) of 35.5 per cent.
- The company’s ROE (Return on Equity) and ROCE (Return on Capital Employed) stood at 42 per cent in FY21.
- Healthcare industry has good growth potential. Vijaya Diagnostics is a debt-free company working on acquisition and expansion plans.
- Investors should invest in IPO for long term.
Reliance Securities: Subscribe from long term perspective
- Based on FY21 earnings, the IPO is valued at 64x which is 15-40 per cent discount as compared to Metropolis and Dr Lal Pathlab. However, based on the estimated earnings of FY 2022, its valuation is 41x which seems reasonable.
- However, given the lackluster listing of KRSNAA Diagnostics, investors should not expect any significant gains from the listing of Vijaya Diagnostics either. The IPO of KRSNAA Diagnostics was valued at 16x the FY21 earnings basis.
- However, investors can invest in it for the long term due to better cash flow, balance sheet, return ratio besides better growth potential in the healthcare industry.
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Vijaya Diagnostic Center IPO Details
- No new shares will be issued under the IPO of Vijaya Diagnostic Center and 3.56 crore shares will be issued under the Offer for Sale (OFS) through the IPO.
- Under this IPO of Rs 1895.04 crore, the price band for shares with face value of Re 1 has been kept at Rs 522-531 per share.
- The lot size for the issue has been kept for 28 shares i.e. investors will have to invest at least Rs 14868 according to the upper price of the price band.
- The allotment of shares of this IPO can be final on 8th September and its shares can be listed in the market on 14th September.
Fidelity Investments shares 8.15% of the reserves
Fidelity Investment Trust has got the maximum number of shares allotted to anchor investors. Fidelity Investment Trust has been allotted 8.68 lakh shares, which is 8.15 per cent of the anchor investors’ share. Goldman Socks Singapore has been allotted 5.28 per cent of the share of anchor investors, or 5.63 lakh shares, while the Abu Dhabi Investment Authority has issued 4.5 lakh shares for Rs 23.89 crore. DSP Healthcare has bought 4.68 lakh shares of the company. Talking about domestic investors, it includes SBI, Edelweiss, Axis Mutual Fund, Nippon Life, Kotak Mahindra and ICICI Prudential.
(Article: Kshitij Bhargava)