Introduction:
Suraksha Diagnostics is an Indian company that offers a variety of diagnostic services. The company's business is built on providing pathology and radiology testing, and medical consultation services. It operates a network of labs and diagnostic centers in eastern India, primarily in West Bengal. The company follows "hub-and-spoke" model, with a central reference lab and smaller satellite locations.
As of Jun-24 its operational network includes 13 hub and 36 spoke centers with 215 customer touch points, 49 diagnostic centres and 166 sample collection centres.
It focuses on individual patients, with a large portion of its revenue coming from the Business-to-Consumer (B2C) segment.
IPO Details:
IPO Date | 29th Nov-24 to 3rd Dec-24 |
Face Value | ₹ 2/- per share |
Price Band | ₹ 420 to ₹ 441 per share |
Lot Size | 34 shares and in multiples thereof |
Issue Size | ₹ 846.25 crores |
OFS | ₹ 846.25 crores |
Expected Post Issue Market Cap (At upper price band) | ~ ₹ 2,300 crores |
Objects of the Issue:
Since it is completely OFS issue, there won’t be any funds available for the company.
Strengths:
- Strong Market Position in Eastern India: Suraksha Diagnostic is a leading diagnostic chain in Eastern India with 49 diagnostic centres, well-positioned to capitalize on the expanding organized diagnostics market in the region.
- Integrated Diagnostics Provider with Comprehensive Service Offerings: It offers a one-stop solution for pathology and radiology testing, along with medical consultation services.
- Advanced Clinical Infrastructure and Skilled Workforce: It has invested in heavily in advanced clinical infrastructure, resulting in streamlining of operations, enhances data analysis, and improving customer experience.
- Prioritizes quality, driving customer loyalty: The company boasts a high repeat customer rate of over 49%, highlighting customer satisfaction and trust in their services.
- Good Mix of Revenues: As of Jun 2024, the revenue from operations from B2C stands at 93.48% and B2B stands at 6.52%
Risks:
- Geographic concentration risk: The company generates a significant portion of its revenue from a single region, West Bengal, posing a risk if business in that region declines. Approx 95.48% of revenues are from in Fiscal 2024 was generated from West Bengal.
- Competition risk: The diagnostics industry in India is highly competitive, with players like Vijaya Diagnostics, Dr. Lal Pathlabs along with major hospitals having their own in-house diagnostics may lead to struggle for increasing their market share.
- Dependence on franchisees: A large portion of collection centres operate through franchisees, with 161 out of 166 collection centres being franchises. Any non-performance/non-compliance could negatively impact the company's brand, reputation, and financial performance.
- Reliance on key personnel: It is dependent on key personnel, including senior management, qualified laboratory professionals, and doctors. The loss of these individuals or the inability to attract and retain talent could negatively impact the company's operations and growth prospects
Financial Highlights:
Particulars | FY2024 | FY2023 | FY2022 |
Revenue from operations (Rs. In Crores) | 219 | 190 | 223 |
Growth in Revenues | 15.3% | -14.7% |
|
Restated EBITDA (Rs. In Crores) | 74 | 47 | 65 |
Restated EBITDA Margins | 33.8% | 24.7% | 29% |
Restated PAT (Rs. In Crores) | 23 | 6 | 21 |
Restated PAT Margins | 10.5% | 3.1% | 9.4% |
RoE | 14.1% | 4.3% | 15.4% |
RoCE | 21.5% | 9% | 23.1% |
Conclusion:
The Indian Healthcare industry is to grow at a CAGR of 10-11% from 2024 to 2028, the Diagonstic service forming a major chunk of the Indian healthcare industry is expected to grow at CAGR of 10-12% from 2024 to 2028.
When compared with the peers:
1. EBITDA per patient (As of 30th Jun 2024)
2. Revenue Mix
3. Others
Based on the industry growth, business operations, and the earnings valuation of 99 times, seems to be fair. So, we suggest our investors to subscribe to this IPO.
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