Vijaya Diagnostic IPO: Anchor investors pump in Rs 566 crore, Goldman Sachs, CLSA, others buy stake

Vijaya Diagnostic Centre has raised Rs 566.12 crore from 29 anchor investors ahead of its IPO (initial public offering).

Vijaya Diagnostic IPO
Vijaya Diagnostic is looking to raise Rs 1,894 crore through the public issue of equity shares. (Image: REUTERS)

Vijaya Diagnostic Centre has raised Rs 566.12 crore from 29 anchor investors ahead of its IPO (initial public offering). The South-India based firm has allocated 1,06,61,418 shares at the upper price band at Rs 531 per equity share to anchor investors such as Goldman Sachs, CLSA, Fidelity International, and Abu Dhabi Investment Authority. The IPO opens for subscription today and will remain open till the end of the week. Vijaya Diagnostic is looking to raise Rs 1,894 crore through the public issue of equity shares in the price band of Rs 522-531 per share.

Goldman Sachs, Fidelity, ADIA pick stake

The largest stake among anchor investors has been picked up by Fidelity Investment Trust. A total of 8.68 lakh shares have been allocated to Fidelity Investment Trust, which is 8.15% of the total anchor portion, for Rs 43.13 crore. Goldman Sachs Singapore has picked up 5.28% of the entire anchor portion or 5.63 lakh shares. Abu Dhabi Investment Authority has bought 4.5 lakh shares for Rs 23.89 crore. DSP Healthcare Fund bought 4.68 lakh shares of Vijaya Diagnostic through the anchor portion, the largest among domestic mutual fund schemes. Other domestic investors include SBI, Edelweiss, Axis Mutual Fund, Nippon Life, Kotak Mahindra, and ICICI Prudential.

What do analysts say?

Choice Broking: Avoid

VDCL has presence in both diagnostic and radiology segment; however its peers mainly have presence in diagnostic business only. The company is a regional player, deriving around 95% of its business from Andhra Pradesh & Telangana region, while its peers are largely multi-regional. VDCL primarily derives almost all of its business from walk-in customers, which is much higher than its peers. The diagnostic sector will continue to have a secular growth trend with good cash flow generation capabilities. However, rising healthcare costs may put stress on profitability of the sector. At higher price band of Rs. 531, VDCL is demanding a TTM P/E multiple of 47x, which is in-line to the peer average. Thus the issue seems to be fully priced. Thus we assign a “AVOID” rating for the issue.

IIFL Securities: Subscribe Now

At the upper price band, Vijaya Diagnostic Centre Limited is demanding a PE multiple of ~64.3X of FY21 earnings which is lower than the industry average of 90.8X. Considering the future growth potential of healthcare industry, revenue from operation, EBITDA and PAT growth of 13.5%, 23.9% and 35.5% CAGR during FY19 to FY21, respectively, strong ROE and ROCE of 23.64% and 42%, respectively in FY21, debt-free company with plans for acquisition and expansions, diversified service offerings and strong technical capabilities of the company, we recommend ‘Subscribe’ to the issue with a long-term perspective.

Also Read: Vijaya Diagnostic IPO opens tomorrow; grey market premium weak, should you subscribe?

Reliance Securities: Subscribe from long term perspective

The IPO is valued at 64x of FY21 earnings, which appears to be at a discount of 15-40% compared to the valuation of its peers like Metropolis and Dr. Lal PathLab. However, considering its annualized earnings for FY22E, it is priced at 41x, which looks reasonable. We further believe lukewarm performance to Krsnaa Diagnostic post listing (IPO was valued at 16x of FY21 earnings), the investors should not expect strong any substantial listing gain. However, steady cash generation, superior balance sheet, decent return ratio and healthy outlook for healthcare industry in the country augur well for the company. We recommend SUBSCRIBE to the IPO from long-term perspective. 

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