Laxmi Dental IPO analysis

Laxmi Dental IPO (initial public offering) will open for subscription on January 13, 2025, and close on January 15, 2025. We break down the dental product company's strengths, weaknesses, and growth prospects to help investors make an informed decision. Laxmi Dental IPO in a nutshell Quality : Between FY22 and FY24, the company reported a three-year average ROE and ROCE of nearly -9 and 4 per cent, respectively. Growth : Between FY22 and FY24, its revenue and profit after tax grew by 83 and almost 19 per cent per annum, respectively. Valuation : At the upper end of the price band, the stock is valued at a P/E and a P/B ratio of nearly 95 and 12 times, respectively. Overview: Rising healthcare expenditure, growing awareness of oral health and a high prevalence of dental disorders in India will benefit Laxmi Dental. The company's growth prospects are further supported by untapped rural markets, government initiatives promoting dental tourism, and increasing demand for cosmetic treatments like clear aligners. Additionally, advancements in technology and the expansion of dental clinics present significant opportunities. However, intense competition in the dental healthcare market will require the company to innovate and differentiate its offerings to secure a strong competitive edge. About Laxmi Dental Incorporated in 2004, Laxmi Dental manufactures and distributes a diverse range of dental products and services. The company operates through subsidiaries in India, the US, and other global markets. Laxmi Dental has the below key business segments: Laboratory: Contributing 63 per cent to the revenue, this segment involves manufacturing and supplying of dental prosthetics such as crowns, bridges, dentures, and veneers. Aligners: Contributing 31 per cent to the revenue for the six months ending September 30, 2024, this segment focuses on modern orthodontic solutions, such as clear aligners for addressing malocclusion and other dental issues. Other: Contributing 6 per cent to revenue for the six months ending September 30, 2024, this includes dental equipment maintenance, training programs, software solutions, and consulting for clinic setups. Geographically, India and the US contributed 67 per cent and 19 per cent to the revenue, while other regions contributed 14 per cent. Strengths of Laxmi Dental Growing aligner business: Contribution from the aligner segment to the revenue rose from 17.5 per cent in FY22 to 31 per cent in H1 FY25. Being the only aligner company in India with vertical integration enables complete production, significant supply chain control, and cost efficiency, which is also reflected in improved margins. Market leadership: Laxmi Dental is India's second-largest player in the domestic dental laboratory business and a leading exporter of dental laboratory products, with operations in 95 countries. Its extensive network encompasses over 22,000 members comprising dentists, clinics, and dental companies. Weaknesses of Laxmi Dental Concentration risk: Laxmi Dental relies on a limited number of suppliers, with the top five suppliers accounting for 90 per cent of raw material purchases. The absence of long-term supply contracts heightens exposure to price fluctuations, supply chain disruptions, and potential production delays. History of bad capital allocation: The company has a history of suboptimal capital allocation, as seen in its earlier attempt to expand into the US market through its subsidiary, Laxmi Dental Lab USA Inc., which incurred significant losses and a business division was also later sold as part of discontinued operations . Along with this, other subsidiaries and aggressive investments had resulted in the company incurring losses on a consolidated level, making it suffer for a few years. Laxmi Dental IPO details Total IPO size (Rs cr) 698 Offer for sale (Rs cr) 560 Fresh issue (Rs cr) 138