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Amid Rising Liquidity and Strong Market Response, Diagnostics Look at IPOs

05 September 20235 mins read by Angel One
Amid Rising Liquidity and Strong Market Response, Diagnostics Look at IPOs
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After grappling with the initial Covid-19 frenzy, the diagnostic industry jumped back stronger to fulfil its role at the Test-Track-Treat strategy’s forefront. It has resulted in an unprecedented inflow of funds, inflating these companies’ valuations significantly.

On the heels of this massively successful year, various private diagnostic service providers are eying an IPO in 2021.

On 4 August 2021, Krsnaa Diagnostics floated its IPO for around Rs. 1200 crores, which will close on 6 August. In June, Vijaya Diagnostic also filed papers with SEBI for an initial offering valued at Rs. 1500 crores.

Even listed diagnostic chain companies have performed impressively over the previous year, prompting newer players to join this rally.

How is the Market Responding to Krsnaa Diagnostics IPO?

Presently, only this company’s IPO is active in the diagnostics industry. Krsnaa Diagnostics IPO price band is set between Rs. 933 – Rs. 954.

So far, its outlook seems positive, with all shares fully subscribed on Wednesday.

At the time of writing, Krsnaa Diagnostics IPO is subscribed 2.56 times, with retail investors trailblazing the rally, bidding for more than 12.75 times.

Accordingly, Krsnaa Diagnostics IPO’s GMP has been revised up by Rs. 70, presently available at a premium of Rs. 450.

But is the hype hollow or substantial?

As far as the company’s financials and prospects are concerned, the hype is well substantiated. Let’s look at its Profit after Tax between FY18 and FY21 (as of December 2020).

Financial Year Profit/(Loss) After Tax (in Rs. million)
2017 – 18 (601.57)
2018 – 19 (580.57)
2019 – 20 (1119.51)
2020 – 21 (as of December 2020) 1959.30

As you can see, the company has posted profits for the first time in these four years, with its revenue increasing by nearly Rs. 3000 million between FY20 and December 2020.

What’s Cooking with the Vijaya Diagnostic IPO?

Thus far, Vijaya Diagnostic has only filed for an IPO of Rs. 1500 crores. Existing shareholders and promoters will dilute 35% of their holdings in the company, but the exact value of the OFS is undisclosed yet.

Unlike Krsnaa Diagnostics, this company has been in profits since FY19 with a gradual increase in its PAT. It clocked profits of Rs. 462.72 million and Rs. 848.97 million in FY19 and FY21, respectively.

Its financial performance hints at stability. But some might infer the relatively moderate uptick in PAT as insufficient capitalisation of the pandemic situation. Nonetheless, it may still be a good play if market trends continue to favour the diagnostics industry.

Speaking of the Diagnostics Industry

The top 4 diagnostic chain companies in India – Dr Lal PathLabs, Thyrocare, Metropolis Healthcare, and Medinova Diagnostics – have witnessed enormous increases in their share prices over the past year.

Medinova Diagnostics posted the most significant gains, with its share prices surging 262% in the previous year. In addition, Dr Lal PathLabs, Thyrocare, and Metropolis Healthcare shares have registered 114%, 99%, and 81% gains, respectively, in the last year.

Wrapping Up

The IPO 2021 festival is gaining massive steam in India, with initial offerings pouring in from various industries. Indian companies have already amassed nearly $3.9 billion through IPOs in the first half of 2021.

Despite that, private diagnostic service providers have remained on the backfoot until now, albeit an overwhelmingly successful year since the pandemic began. The industry is highly fragmented, with only four companies dominating the market. That might be a reason why diagnostics have withheld from issuing an IPO until now.

However, now that companies in this sector are onboarding the IPO bandwagon, more players will likely follow suit. Investors may want to keep their eyes peeled for more IPOs in this sector projected to clock a 10% CAGR over the next 5 years.


Frequently Asked Questions

  1. How can I subscribe to Krsnaa Diagnostics IPO?

You can subscribe to Krsnaa Diagnostics IPO via the Angel One platform. Open a Demat account for free if you are new, or sign in to apply for the IPO.

  1. What is the minimum market lot of Krsnaa Diagnostics IPO?

15 shares or Rs. 14160

  1. What is the market value of the diagnostics industry in India?

It’s pegged at Rs. 67500 crores or $9 billion.

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