Medplus Health Services IPO opens today, grey market premium strong; should you subscribe? What brokerages say

The public issue of MedPlus, India’s second largest pharmacy by volume and reach, consists of a fresh issue of shares worth Rs 600 crore and an offer-for-sale (OFS) of shares worth Rs 798.29 crore.

MedPlus Health IPO to open on Dec 13 price band set check issue details
MedPlus Health Services Ltd IPO seems to have attracted considerable investor interest, going by nearly 40% premium in grey market trading

Medplus Health Services Ltd IPO will open today (13 December), and will close on Wednesday. The public issue of India’s second largest pharmacy by volume and reach consists of a fresh issue of shares worth Rs 600 crore and an offer-for-sale (OFS) of shares worth Rs 798.29 crore. Medplus has set the IPO price band at Rs 780–796 per equity share of face value Rs 2 each. Ahead of IPO opening, the shares of MedPlus Health Services Ltd were trading at a premium of Rs 300 in the grey market, up from Rs 250 earlier, according to IPOWatch.

The offer includes a reservation of shares worth Rs 5 crore for Medplus employees. Eligible employees will get shares at a discount of Rs 78 per share to the final offer price. The allotment of shares is likely to get finalised by December 20 and successful investors will get shares in their demat accounts on or after December 22. The shares will list on the BSE and the NSE on December 23.

Should you subscribe?

Several brokerages have a positive view about the IPO, and have assigned a ‘subscribe’ rating stating the fact that there is a huge opportunity of growth for the company since the organised retail pharmacy accounts for only 10% of the total retail pharmacy and there is a gradual shift taking place from unorganised to organised pharmacy.

At inflection point; Recommend ‘Subscribe’: Prabhudas Lilladher

“We recommend ‘SUBSCRIBE’ to the IPO of Medplus Health Services Ltd (Medplus), a compelling omni- channel play in healthcare retailing as 1) profitable operations despite higher discounts across omni-channel deliveries, given its fully integrated offerings and 2) huge scope to grow as industry moves from unorganized to organized omni- channel players (10% CAGR in Indian retail pharmacy market in next five years),” said brokerage firm Prabhudas Lilladher in its IPO report.

The brokerage firm expects Medplus to gain scale and profitability given 1) faster pace of store expansion (60-70 new stores/month) 2) benefits of economy of scale and 3) faster break-even with increasing contribution of private labels over medium term. It further said, “We believe Medplus will trade at a higher multiple as it is a pure play omni channel company, with a scarcity premium and high growth rates.”

Subscribe: Angel One

“Medplus is the second largest pharmacy retailer in India; the company offers a good value proposition to its customers in terms of discount, wide range of product and fast delivery. We believe that the company’s omnichannel platform will help to deliver strong growth in future. Hence, we are assigning a “SUBSCRIBE” recommendation to the Medplus Health Services Limited IPO, said Angel One in its IPO report.

Subscribe: ICICI Direct

“Medplus with its clustered store presence is well suited to leverage on Omni-channel platform with a hyper local delivery model. At the upper price band, it is valued at ~43.9x EV/EBITDA and ~3.1x EV/Sales for FY21. We assign SUBSCRIBE rating given its unique model and decent valuation,” said ICICI Securities.

MedPlus raises Rs 418 crore from 36 anchor investors

The company last week on 10 December mopped up Rs 418 crore from 36 anchor investors by allocating 52,51,111 equity shares at the upper end of the price band of Rs 796 per share. Marquee investors like Abu Dhabi Investment Authority, Blackrock Global Funds, Nomura, Fidelity Investment Trust, Goldman Sachs, Morgan Stanley, Wasatch International Opportunities Fund, Carmignac Portfolio, and CI Asian Tiger Fund were allocated funds through this process.HDFC Trustee, Aditya Birla Sun Life, SBI Mutual Fund, Nippon Life, Kotak Mutual Fund, Motilal Oswal Mutual Fund, HDFC Life Insurance, ICICI Prudential Life Insurance, SBI Life Insurance, and Edelweiss amongst domestic investors also invested in the company.

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