Vijaya Diagnostics Centre IPO to open tomorrow: Should you apply?

The price band for the IPO has been fixed at Rs 522-531 per share with a face value of Re 1 each. Existing shareholders of Hyderabad-based Vijaya Diagnostic and the company are eyeing to raise Rs 1,895 crore through the primary offering.

Considering the FY-21 adjusted EPS of Rs 8.26 on a post-issue basis, the company is going to list at a PE of 64.26 with a market cap of Rs 5,414 crore, say analysts. Its peers namely Dr Lal Path Labs and Metropolis Healthcare are trading at a PE of 80.66 and 56.55, respectively.

“We assign ‘subscribe’ rating to this IPO as the company is one of the fastest growing diagnostic chains with dominant position in south India and is well positioned to leverage the high growth in the Indian diagnostics industry. Also, it is available at reasonable valuation as compared to its peers,” said analyst at Marwadi Shares and Finance.

Vijaya Diagnostics Centre offers a one-stop solution for pathology & radiology testing services. The company offers 740 routine and 870 specialized pathology tests and 220 basic and 320 advanced radiology tests.

It has 81 diagnostic centres and 11 reference laboratories across 13 cities and towns. The company derived most of its revenue from operations from its core geographies–Hyderabad and rest of Telangana, and Andhra Pradesh.

“Vijaya Diagnostics IPO has been priced at Rs 531 which seems to be higher in comparison to recently listed peers. We have a neutral outlook on the IPO,” said analysts at Angel Broking.

However, the company manages to charge more than its peers for its services. During FY20, the company’s tests per customer visit was 2.83, its operating revenue per customer was Rs 1,213.72 and operating revenue per test was Rs 428.14, all of which are higher as compared to its listed regional peers.

The grey market premium shows the market is also not that enthusiastic about the issue. Grey market premium for Vijaya Diagnostics is at Rs 30, which is 5.6 per cent of IPO price.

Investors can bid for a minimum of 28 equity shares and in multiples of 28 shares thereafter. The company has reserved 1.5 lakh equity shares for its eligible employees, who will be given a discount of Rs 52 per equity share in the bidding process.

The IPO closes on Friday, September 3, for subscription.