Please refer to important disclosures at the end of this report
1
Vijaya Diagnostic Centre Limited
IPO NOTE Vijaya Diagnostic Centre Limited.
August 31, 2021
Vijaya Diagnostic Centre was incorporated in 2002, and is the largest integrated
diagnostic chain in southern India. Vijaya Diagnostic provides integrated services
of pathology and radiology and offers around 740 routine tests, 870 specialized
pathology tests, 220 basic tests, and 320 advanced radiology tests. Vijaya
diagnostic network consists of 80 diagnostic centers and 11 reference labs across
13 cities. Companies 81% of revenue comes from Hyderabad.
Positives:
(a)
Fastest growing diagnostic chain with a dominant position in south
India. Between 2017 and 2020 volume of tests has grown by15% while volume of
patients has grown by 14%. (b). The Company provides Integrated diagnostic
services of pathology & Radiology under one roof. (c). Company has a very high
brand recall in its core market of Hyderabad and derives 92% of its revenues from
the high margin B2C business.
Investment concerns: (a) Company has a very high concentration toward one city
with Hyderabad accounting for 81% of the revenues. Increase in competition in
the main market can impact growth as well as EBITDA margins. (b) In FY2021
company had got some benefits due to increase in Covid related tests, which is
not expected to continue in the future and can have an adverse impact on the
volume growth of the company. (c) Low promoter holding will also be an issue for
the company as post IPO promoter holding will be relatively low at 32.7%
Outlook & Valuation: Based on FY2021 numbers, IPO is priced at a Price to
Earnings of 64.3 times and EV/EBITDA of 30 times at the upper price band of the
IPO, which is in line with the listed peer group. Company already has a higher
market share in key geographi like Hyderabad and we do not expect the covid
related benefit to continue in coming years. We believe that at ₹531, all the near
term positives are priced in and leaves limited upside for the investors. Hence, we
are assigning a “NEUTRAL” recommendation to the Vijaya Diagnostic centre
limited IPO.
Key Financials
Y/E March (₹ cr)
FY19
FY20
FY21
Net Sales
292.5
338.8
376.7
% chg
-
15.8
11.2
Net Profit
46.4
62.7
85.1
% chg
-
35.1
35.7
EBITDA (%)
40.5
43.7
47.2
EPS
4.5
6.1
8.3
P/E (x)
118.0
86.6
64.3
P/BV (x)
26.1
19.7
15.1
RONW (%)
22
23
24
ROCE (%)
23
23
26
EV/EBITDA
46.4
36.7
30.0
EV/Sales
18.8
16.1
14.2
Source: Company, Angel Research
NEUTRAL
Issue Open: September 01, 2021
Issue Close: September 03, 2021
Issue Details
Face
Value: ₹1
Present Eq. Paid up Capital: ₹4.53 Cr
Issue Size: ₹1,894** Cr
Offer for Sale: ₹1,894** Cr
Price Band: ₹522 - 531
Lot Size: 28 shares and in multiple thereafter
Expected Listing : 14th September 2021
Employee Discount - ₹52 per share
Post-issue mkt. cap: * ₹5323 Cr - ** ₹5,414 Cr
Promoters holding Pre-Issue: 37.78%
Promoters holding Post-Issue: 32.7%
*Calculated on lower price band
** Calculated on upper price band
Book
Building
QIBs
50% of issue
Non-Institutional
15% of issue
Retail
35% of issue
Post issue Shareholding pattern
Promoters
Others
32.7%
67.3%
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
2
Company background
Vijaya Diagnostic Centre Limited was incorporated on June 5, 2002. Vijay
Diagnostic 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.
Vijaya offers an one-stop solution for pathology and radiology testing services
to their customers through their extensive operational network, which consists
of 80 diagnostic centres and 11 reference laboratories across 13 cities and
towns in the states of Telangana; Andhra Pradesh.
Vijaya offers a comprehensive range of approximately 740 routine and 870
specialized pathology tests and approximately 220 basic and 320 advanced
radiology tests that cover a range of specialties and disciplines, as of June 30,
2021.
Company provides value-added services such as home collection of
specimens, house calls and various delivery or access modes (i.e., at
diagnostic centres, SMS, email and web portal) for test reports. They have
implemented a ‘hub and spoke’ model, whereby specimens are collected
across multiple locations within a catchment area or a region for delivery to
their reference laboratories for diagnostic testing.
Issue details –
The issue comprises of offer for sale of upto ₹1,894 crore (3.56 crores
shares) with the price band of ₹522-₹531.
Objectives of the Offer
To carry out the Offer for Sale of up to 35,688,064 Equity Shares by the
Selling Shareholders.
Achieve the benefits of listing the Equity Shares on the Stock Exchanges.
Pre & Post Shareholding
(Pre-issue)
(Post-issue)
Particular
No of shares
%
No of shares
%
Promoter & Promoter Group
6,09,51,621
59.7%
5,58,53,325
54.7%
Public
4,10,14,305
40.2%
4,61,12,601
45.2%
Total
10,19,65,926
100%
10,19,65,926
100%
Source: Company, Angel Research
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
3
Key Management Personnel
Dr. S. Surendranath Reddy is the executive Chairman of our Company. He holds
a bachelor’s degree in medicine from Shri Venkatesvara University and a
provisional degree of Doctor of Medicine in Radiology from Osmania Medical
College, Hyderabad. He has over 19 years of experience with our Company. He is
a life member of the Indian Radiological and Imaging Association.
Sunil Chandra Kondapally is the Executive Director of our Company. He has been
associated with our Company since incorporation. He holds a bachelor’s degree in
science in electrical engineering from Florida State University. He has over 17
years of experience in the field of pharmaceutical industry. He founded a
pharmaceutical services company Trikona Pharmaceuticals Private Limited in 2016
and QPS Bioserve India Private Limited in 2004.
S. Geeta Reddy is a Non-Executive Director of our Company. She holds a
bachelor’s degree in law from Osmania University.She is enrolled as an
Advocate with the Andhra Pradesh High Court in 1986. She is on the board of
directors of various companies such as, Sura Agritech Private Limited, Iffco
Kisan SEZ Limited, Namrata Diagnostic Centre Private Limited, Vijaya
Hospitals Private Limited and Doctorslab Medical Services Private Limited.
Nishant Sharma is the Non-Executive Director – Nominee Director of our
Company. He holds a master’s degree in biochemical engineering and bio-
technology from the Indian Institute of Technology Delhi and a master’s
degree in business administration from the Harvard University. He has over
18 years of experience in across various fields.
Shekhar Prasad Singh is the Non-Executive Director – Independent Director of
our Company. He is a retired IAS officer of 1983 batch. Previously, he acted
as Chief Secretary to Government of Telangana.
Dr. D Nageshwar Reddy is the Non-Executive Director – Independent Director
of our Company. He holds a degree from University of Madras in general
medicine and a D.M in gastroenterology from Postgraduate Institute of
Medical Education and Research, Chandigarh. He is currently the Chairman of
Asian Institute of Gastroenterology, Hyderabad.
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
4
Consolidated Profit & Loss Account
Y/E March (₹ cr)
FY19
FY20
FY21
Total operating income
292.5
338.8
376.7
% chg
-
15.8
11.2
Total Expenditure
184.3
206.1
210.6
Cost of materials consumed
40.4
43.9
57
Employee Benefit Expense
53.8
62.4
57.4
Other Expenses
90.1
99.8
96.2
EBITDA
108.2
132.7
166.1
% chg
-
22.6
25.2
(% of Net Sales)
37.0
39.2
44.1
Depreciation& Amortisation
39.6
49.1
50.4
EBIT
68.6
83.6
115.7
% chg
-
21.9
38.4
(% of Net Sales)
23.5
24.7
30.7
Interest & other Charges
13.5
15.3
15.2
Other Income
10.3
15.3
11.8
(% of Sales)
3.5
4.5
3.1
Recurring PBT
65.4
83.6
112.3
(% of Net Sales)
22.4
24.7
29.8
Tax
19.0
20.9
27.2
PAT (reported)
46.4
62.7
85.1
% chg
-
35.1
35.7
(% of Net Sales)
15.9
18.5
22.6
EPS (as stated)
4.50
6.13
8.26
% chg
-
36.2
34.7
Source: Company, Angel Research
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
5
Consolidated Cash Flow Statement
Y/E March (₹ cr)
FY19
FY20
FY21
Profit before tax
65.3
83.4
112.1
Depreciation
39.6
49.1
50.4
Change in Working Capital
1.7
0.1
1.3
Interest Expense
3.7
4.0
2.0
Direct Tax Paid
(18.6)
(23.2)
(31.2)
Others
10.6
6.1
12.7
Cash Flow from Operations
90.6
106.1
129.6
(Inc.)/ Dec. in Fixed Assets
(59.1)
(37.5)
(31.2)
Investment
(31.4)
1.1
(103.3)
Interest received
0.6
5.7
4.7
Cash Flow from Investing
(89.9)
(30.7)
(129.8)
Procees/Repayment of Long Term Borrowing
7.4
(8.9)
(28.2)
Dividend paid on equity shares
(2.8)
(3.2)
(1.4)
Others
(13.6)
(16.7)
(18.9)
Cash Flow from Financing
(7.1)
(29.4)
(48.6)
Inc./(Dec.) in Cash
(6.4)
45.9
(48.8)
Opening Cash balances
16.1
9.7
55.6
Closing Cash balances
9.7
55.6
6.8
Source: Company, Angel Research
Consolidated Balance Sheet
Y/E March (₹ cr)
FY19
FY20
FY21
SOURCES OF FUNDS
Equity Share Capital
4.5
4.5
4.5
Other equity
200
270
354
Shareholders Funds
205
275
359
Total Loans
137
143
130
Other liabilities
5.4
6.8
7.8
Total Liabilities
347
424
496
APPLICATION OF FUNDS
Net Block
154
156
151
Right to use assets
108
125
126
Current Assets
137
186
238
Sundry Debtors
9
8
6
Inventories
2
3
3
Cash & Bank Balance
56
119
199
Other Assets
2
2
3
Current liabilities
57
58
44
Net Current Assets
80
128
195
Other Non Current Asset
7
14
25
Total Assets
347
424
496
Source: Company, Angel Research
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
6
Key Ratio
Y/E March
FY19
FY20
FY21
Valuation Ratio (x)
P/E (on FDEPS)
118.0
86.6
64.3
P/CEPS
63.4
49.4
41.3
P/BV
26.1
19.7
15.1
EV/Sales
18.8
16.1
14.2
EV/EBITDA
46.4
36.7
30.0
Per Share Data (Rs)
EPS
4.50
6.13
8.26
Cash EPS
8.4
10.8
12.8
Book Value
20.3
26.9
35.2
DPS
-
-
-
Number of share
10.20
10.20
10.20
Returns (%)
RONW
22.4%
22.8%
23.7%
ROCE
22.6%
23.4%
25.7%
Turnover ratios (x)
Asset Turnover (net)
1.9
2.3
2.6
Receivables (days)
11.4
8.5
6.2
Inventory Days
3.0
3.4
3.0
Payables (days)
196.1
179.6
140.9
Working capital cycle (days)
-181.7
-167.7
-131.7
Source: Company, Angel Research
Vijaya Diagnostic Centre Limited | IPO Note
August 31, 2021
7
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