Krsnaa Diagnostics IPO

Strengths

• Scaled Diagnostics Operation: Krsnaa Diagnostics operates in 14 states across the country with 465 pathology labs and over 2000 diagnostic centres, including collection and processing centres. Its operational base provides the company with strong financial leverage, helping it maintain a 30% operating margin as of 31 March 2020.
• Healthy Financial Risk Profile: The management of Krsnaa Diagnostics strives to maintain a 1:1 equity-to-debt ratio, keeping its risk profile at a moderate level over the medium term.
• Robust Infrastructure: It uses advanced technology and the best of the latest equipment in its diagnostics centres. Such modern and technologically advanced infrastructure offers it a competitive advantage in the market and helps retain and increase its customer base.

Weaknesses 

• Working capital needs: The PPP segment accounts for a significant portion of its receivables, stretching the credit period between 115 and 139 days. Therefore, its working capital requirements are significantly high.

Opportunities 

• Growth Prospects: The diverse geographical presence and strong financials offer Krsnaa Diagnostics the flexibility to expand its scale of operation and facility units.
• Large Government Orders: Since the pandemic hit, GOI has decided to up its investment in the healthcare sector. This opens up opportunities for the company as it receives nearly 70% of its orders from government departments as of 31 March 2020.

Threats 

• Increase in Operating Costs: The tenders Krsnaa Diagnostics receive usually feature a tenure of 7 – 10 years. The price goes up by 2 – 3% after every 3 – 5 years. Therefore, if there’s a sudden increase in its operating costs, the company may struggle.
• Generic Products: Diagnostics centres across the country offer similar tests and methods of prognosis. This increases the competition for the company from both regional and established market players.