Vijaya Diagnostic Centre IPO GMP, Subscription Status, Financials: Should you Invest?

The initial public offering (IPO) of the Hyderabad based diagnostics chain operator, Vijaya Diagnostic Centre completed its day one of subscription yesterday. The public issue saw a total subscription of 30 per cent or 0.30 times at the end of the first day of bidding by investors. The public offer had received bids for 74.79 lakh equity shares against its IPO size of 2.5 crore equity shares according to data on the exchanges. The issue size of the Vijaya Diagnostic Centre IPO was set at Rs 1,895.04 crore and the issue itself consists entirely of an offer for sale (OFS) that is worth the same. The IPO was listed as carrying with it 35,688.064 equity shares with a face value of Rs 1 per equity share. The price band of the IPO was Rs 522 to Rs 531 per equity share.

The company had already mobilised around Rs 566.12 crore from its anchor investors a day before the issue opened for trading, i.e., on August 31. This led to the issue size being reduced from the aforementioned 3.56 crore equity shares to the now 2.5 crore equity shares.

In terms of subscriptions as per the investor categories, the qualified institutional buyers (QIBs) had subscribed to the issue around 23 per cent or 0.23 times. The non-institutional buyers (NIIs) had subscribed to the IPO around 0.01 per cent and the retail investor category had subscribed to the issue around 46 per cent or 0.46 times. There were also subscriptions by employees, which stood at 24 per cent or 0.24 times at the end of day one.

The grey market premium (GMP) of the Vijaya Diagnostic Centre IPO saw its shares trading at a premium of Rs 20 per equity share on the grey market, according to data by IPO Watch. This indicated that the shares were trading at Rs 542 to Rs 551 on the unlisted grey market.

The company is looking at a potential allotment date of September 8, 2021, while the listing date for the issue might likely take place on September 14, 2021. This is yet to be confirmed.

Speaking on the company, Hem Securities said in a note, “Vijaya Diagnostic Centre Ltd (VDCL) is the largest integrated diagnostic chain in southern India, by operating revenue, and also one of the fastest-growing diagnostic chain by revenue for fiscal year 2020.”

The company which was established in 1981 is one of the fastest-growing chain diagnostic operations in the South as it has over 80 diagnostic centres and 11 reference labs, which are spread across a total of 13 different cities and towns in the states of Telangana, Andhra Pradesh, National Capital Region, and Kolkata.

“Company’s business has demonstrated strong financial performance. For the three months ended June 30, 2021, company’s operating revenue per test was Rs 562.31 and OPBDIT per test was Rs 260.59; company’s operating revenue per customer was Rs 1,298.96 and OPBDIT per customer was Rs 601.39. For the fiscal year 2021, company has grown at CAGR of 13.26 per cent for fiscal years 2019 to fiscal year 2020; its operating revenue per test was Rs 428 and OPBDIT per test was Rs 168 for fiscal year 2020; while its operating revenue per customer was Rs 1,214 and OPBDIT per customer was Rs 475 for fiscal year 2020,” said Hem Securities, elaborating on the company’s financial performance.

On the outlook of Vijaya Diagnostic Centre and the IPO, Hem Securities said, “Company is bringing the issue at price band of Rs 522-531 per share at p/e multiple of 64x on FY21 PAT basis. We like integrated business model of company due to which company has posted superior financial performance. Company’s OPBDIT margin ranked second among other major diagnostics along with negative working capital and high cash flow generation leading to strong net cash position. Also company’s strategy of expanding in Telangana and Andhra Pradesh which are expected to grow at CAGR of 12 per cent to 13 per cent by 2023 will be next growth driver for company. Hence, looking after all, we recommend “Subscribe” on issue.”