Vijaya Diagnostic Centre Limited, started in 1981, is the largest integrated diagnostic chain in southern India, by operating revenue, and also one of the fastest-growing diagnostic chain by revenue for fiscal year 2020 (Source: CRISIL Report). They offer a one-stop solution for pathology and radiology testing services to the customers through the extensive operational network, which consists of 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana and Andhra Pradesh and in the National Capital Region and Kolkata as on June 30, 2021. For the three months ended June 30, 2021 and the fiscal year 2021, they derived 95.91% and 96.20% of the revenue from operations from the core geographies, Hyderabad and rest of Telangana and Andhra Pradesh, respectively. Company offers a comprehensive range of approximately 740 routine and 870 specialised pathology tests and approximately 220 basic and 320 advanced radiology tests that cover a range of specialties and disciplines, as of June 30, 2021. The test menu includes pathology tests ranging from basic biochemistry and clinical pathology to cytogenetics and high-end molecular diagnostic tests, and radiology tests ranging from basic echocardiograms, X-rays and ultrasounds to advanced radiology tests including computerised tomography ('CT') scans, magnetic resonance imaging ('MRI') scans, single photon emission computed tomography ('SPECT') and advanced positron emission tomography CT ('PET CT'). They also offer a broad spectrum of health and wellness packages to the customers as per their requirements. For convenience of the customers, they provide value-added services such as home collection of specimens, house calls and various delivery or access modes (i.e., at diagnostic centres, SMS, email and web portal) for test reports. Company has implemented a 'hub and spoke' model, whereby specimens are collected across multiple locations within a catchment area or a region for delivery to the reference laboratories for diagnostic testing. This model provides greater economies of scale and enhances consistency of the testing procedures and results. All of their centres offer integrated diagnostics services (pathology and radiology tests under one roof) with smaller spokes offering pathology tests and basic radiology tests and hub centres (ARCs) offering pathology tests, basic radiology tests and advanced radiology tests such as MRI, HRCT, SPECT and PET CT. As of June 30, 2021, their operational network consists of diagnostic centre network of (i) a flagship centre located in Hyderabad, which is the main 'hub' and equipped to conduct all of pathology specimens collection, basic and advanced radiology tests; (ii) 20 hub centres, which are equipped to conduct all of pathology specimens collection, basic radiology tests and certain advanced radiology tests; and (iii) 60 diagnostic centres, which are equipped to conduct a majority of pathology specimen collection and certain basic radiology tests; and a laboratory network of (i) a national reference laboratory co-located with the flagship centre; and (ii) 10 reference laboratories co-located with certain hub centres and diagnostic centres. Company's diagnostic services are provided by a medical professional team consisting of 74 laboratory doctors, 19 physicians, 105 radiologists and 1,027 well-trained technical staff in the operational network, as of June 30, 2021. As per financial performance, Vijaya Diagnostic has posted total income/net profits of Rs. 302.94 cr. / Rs. 46.27 cr. (FY19), Rs. 354.18 cr. / Rs. 62.38 cr. (FY20), Rs. 388.59 cr. / Rs. 84.89 cr. (FY21). For Q1 FY22, company has posted revenue of Rs 125.97 Cr and net profit of Rs 33.30 Cr. So company has posted consistent growth over last couple of years. Company has posted an average EPS of Rs. 6.92 and average RoNW of 23.14% for last three fiscals. Issue is priced at a P/BV of 13.74 as per NAV of 38.53 on 30.06.21. If we attribute latest earnings of Q1 FY22 on fully diluted equity post issue, then asking price is at P/E of around 40 and as per FY21 earnings P/E is 63. As per RHP, comparison between listed peers are shown in above table. On BRLM's front, three BRLMs are associated with this IPO, and have handled around 60 IPO in last three fiscals. From last 10 IPOs, 4 are opened below issue price and remaining are opened above issue on the day of listing. As of now, 3 are trading below issue price and others are trading above issue price. ( As on 26.08.21) As per financials, company has shown good growth in sales, RoNW is 23.64% and P/E is around 60. So issue looks fully priced compared to peers. In current pandemic situation, diagnostic companies performed extremely well, so as situation will normalise, performance may decline. But this sector will grow at good rate in next 3-5 years. Performance of BRLM is average. So, we are giving NEUTRAL rating to this IPO.
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