Suraksha Diagnostic IPO analysis

Suraksha Diagnostic IPO (initial public offering) will open for subscription on November 29, 2024, and close on December 3, 2024. We break down the diagnostic company's strengths, weaknesses, and growth prospects to help investors make an informed decision. Suraksha Diagnostic IPO in a nutshell Quality : The company reported a three-year average ROE and ROCE of 11 per cent each during FY22-24. Growth : Between FY22 and FY24, its revenue fell nearly one per cent per annum as a slowdown in Covid business dipped overall revenue in FY23. Its net profit, meanwhile, grew around 7 per cent annually over the same period. Valuation : The stock is valued at a P/E and a P/B ratio of 97 and 12 times, respectively. Overview: The company stands to benefit from consumers' increased willingness to invest in quality healthcare. The rising prevalence of chronic diseases like diabetes, coupled with heightened health awareness following the Covid-19 pandemic, provides a strong foundation for the company to scale its operations. The diagnostic market in East India, where Suraksha primarily operates, is projected to grow at an annual rate of 10.5 to 12.5 per cent. However, the company faces challenges from intensifying competition, not only from established players in the industry but also from new entrants, including hospitals venturing into diagnostic services. About Suraksha Diagnostic Suraksha Diagnostic, a leading diagnostic service provider, operates 49 centers across East India, supported by 166 sample collection points and nine laboratories as of June 30, 2024. In FY24, the company generated 53 per cent of its revenue from pathology tests, 46 per cent from radiology, and 0.18 per cent from Covid tests. With around 94 per cent of its revenue coming from retail customers (B2C) and the rest from corporate users (B2B), Suraksha reported an average revenue per patient of Rs 1,922 in FY24, an annual increase of around 21 per cent from FY22. Strengths of Suraksha Diagnostic Industry-leading revenue per patient: The company's diagnostic centers also house polyclinics (small medical clinics), which provide medical consultations to patients. This value addition helped them realise the highest revenue per patient in the industry during FY22-24. Weaknesses of Suraksha Diagnostic High promoter pledging : The promoter group has pledged 67 per cent of its pre-IPO shareholding in Suraksha and about 41 per cent of its total paid-up capital as security for a loan for another group company. This loan was secured through the issuance of 8,000 non-convertible debentures (NCDs) worth Rs 1 lakh each to Vistra ITCL. Although Vistra released the pledged shares to allow the IPO to proceed, it's expected that the shares will be pledged again after the IPO. Suraksha Diagnostic IPO details Total IPO size (Rs cr) 846 Offer for sale (Rs cr) 846 Fresh issue (Rs cr) - Price band (Rs) 420-441 Subscription dates November 29-December 3, 2024 Purpose of issue Offer for sale Post IPO M-cap (Rs cr) 2,296.80 Net worth (Rs cr) 187.10 Promoter holding (%) 48.80 Price/earnings rat