Last updated: 03 Aug, 2021 | 01:20 pm
Krsnaa Diagnostics IPO opens for subscription on 4th August. The company is looking to raise Rs 1,213.33 crore through the public issue. Here are the details:
About the issue
Krsnaa Diagnostics IPO Date: 4th - 6th August 2021
Krsnaa Diagnostics IPO Price band: Rs 933 - 954 per share
Issue Size: Rs 1,213.3 crore (Fresh equity shares worth Rs 400 cr & offer for sale worth Rs 813.3 crore.)
Post Issue Implied Market Cap: Rs 2,937 – 2,994 Cr
Reservation: QIB 75%, Retail - 10%, NII 15%.
Employee reservation: Equity shares aggregating up to Rs 20 cr
Bid lot: 15 shares, and in multiples of 15 shares
The money raised from the IPO will be used:
About Krsnaa Diagnostics
Krsnaa Diagnostics Services
Pathology - Under this service, the company offers a comprehensive test menu covering the key disciplines of conventional and specialized lab services. They also have fully automated analyzers and a team of highly skilled and trained technical staff to undertake different investigations.
Tele-radiology - They offer tele-radiology services in Pune that consist of sections for 80 CT/MRI/XRay technologists teams, a 100-member conference room, and radiologists reporting area.
Home Collection Services - Under this, they collect specimens from patients’ locations, such as their homes or offices. It is a key part of their customer-centric approach.
The listed peers of Krsnaa Diagnostics include Metropolis Healthcare Limited and Dr. Lal PathLabs Limited.
Brand power - The company provides quality and reliable healthcare services at affordable prices. They follow accreditations and protocols in line with best industry practices.
Large number of centres
PPP model - Their PPP agreements are typically long-term in nature and ensure predictability of their revenues from operations. Their continued focus on this segment has led them to become a preferred partner for public health agencies, resulting in, since commencement of operations, 77.59% of all tenders (by number) they have bid for being granted to them.
Expansion - The company plans to grow its network across all states in India. They also intend to focus on the private sectors across both B2B and B2C segments by partnering with more private sector healthcare providers.
Focus on specialized diagnostics - Krsnaa Diagnostic intends to enhance its capabilities in specialized diagnostic services such as molecular diagnostic and genomics.
Widen digital footprint - The company intends to increase its engagement and touchpoints with customers through various technology and digital initiatives.
Focus on profitability and efficiency - The company will rationalize its costs to improve the margins. They intend to continue to upgrade their diagnostic equipment and technology to increase the efficiency of operations.
Dependency on public health agencies - A substantial portion of their revenue from operations (67.5%) comes from contracts with public health agencies. If the company fails to negotiate similar fee arrangements or if existing contracts are canceled, the financials of the company will be impacted.
COVID Impact- The COVID-19 pandemic has led to a surge in demand for their services. In FY21, 37% of the revenue from operations came from covid related services. Krsnaa might have trouble making up for these revenues post pandemic.
Capital intensive industry - The business is capital intensive and if the company experiences insufficient cash flows from operations or is unable to borrow to meet capital requirements, it may materially and adversely affect business and results of operations.
Krsnaa Diagnostics IPO: INDmoney Recommendation
Krsnaa Diagnostics has reported a steady growth in topline (CAGR of 38%) over the last three years. The company was able to turn in a profit of Rs 185 crore in FY21, mainly due to fair value gain in the previous year. Adjusted for fair value and deferred tax, net profit for FY21 rose to Rs 31.4 crore compared with Rs 13.53 crore in the year earlier.
At the higher end of the price band, Krsnaa Diagnostics IPO is aggressively priced at a P/E ratio of ~80 times FY21 EPS (on a fully diluted on post-issue basis). Krsnaa Diagnostics has a negative average P/E on the basis of the last three years. The P/E ratio is in line with Metropolis Healthcare (81 times) but cheaper than Dr Lal Path Labs (111 times).
Given the company’s steady growth in topline, stable margins, good return ratios, strong runway for growth we remain “positive” on the long-term prospects of this issue.