Dr. Agarwal's Health Care IPO analysis

Dr. Agarwal's Health Care IPO (initial public offering) will open for subscription on January 29, 2025, and close on January 31, 2025. Below is a breakdown of the eye specialist's strengths, weaknesses and growth prospects to help investors make an informed decision. Dr. Agarwal's Health Care IPO in a nutshell Quality: Between FY22 and FY24, Dr. Agarwal's Health Care reported a three-year average ROE and ROCE of around 18 and 11 per cent, respectively. Growth: Between FY22 and FY24, its revenue and net profit grew annually by 38 per cent and 48 per cent, respectively. Valuation: At the upper price band of Rs 402, the stock is expected to be valued at a P/E and P/B ratio of around 123.3 and 7 times, respectively. Overview: India has the largest number of visually impaired people worldwide, making eye care a critical sector. The Indian eye care market, which constituted about 6 per cent of the overall healthcare market in FY24, is projected to grow at 12-14 per cent annually between 2024 and 2028. However, interested investors should take note of the high competitive intensity of the eye care market. About Dr. Agarwal's Health Care Incorporated in 2010, Dr. Agarwal's Health Care is an eye care service provider specialising in surgical procedures (cataract and refractive), consultations, diagnostics, and the sale of eye-related products. The eye specialist derives 65 per cent of its revenue from the surgery segment and 21 per cent from product sales. It currently has 737 doctors and derives nearly 90 per cent of its revenue from India. It operates on a 'hub and spoke' model, where central facilities (hubs) handle complex medical procedures, while smaller facilities (spokes) manage basic care and refer patients needing specialised treatment to the hubs. As of FY24, Dr. Agarwal's Health Care operates 28 hubs and 165 spokes across India and holds a 25 per cent market share in the country's eye care service chain market. Strengths of Dr. Agarwal's Health Care Comprehensive service offerings: Dr. Agarwal's Health Care offers end-to-end eye care services, covering everything from checkups and consultations to surgeries and the sale of optical and pharmaceutical products. Patients can conveniently access all eye-related services under a single brand. Dominant market position: The company is India's largest eye care service provider by revenue, commanding a 25 per cent market share of the eye care service chain market. Weaknesses of Dr. Agarwal's Health Care Geographic concentration: As of September 30, 2024, almost 50 per cent of the company's facilities are concentrated in Tamil Nadu and Maharashtra. This reliance on two states exposes it to risks such as economic disruptions, political or social unrest, or changes in state-specific policies that could impact its financials. Intense competition: The Indian eye care market is highly competitive, with the presence of established single-specialty players like ASG Hospitals, Centre for Sight, Lotus Eye Hospitals and Disha Eye Hospitals, along with numerous multi-specialty healthcare providers. Dr. Agarwal's Health Care IPO details Total IPO size (Rs cr) 3,027 Offer for sale (Rs cr) 2,727 Fresh issue (Rs cr) 300 Price band (Rs) 382 - 402 Subscription dates January 29 - 31, 2025 Purpose of issue Repayment of borrowings, inorganic acquisition and offer for sale Post-IPO M-cap (Rs cr) 12,698 Net worth (Rs cr) 1,803 Promoter holding (%) 32.5 Price-to-earnings ratio (P/E) 123.3 Price-to-book ratio (P/B) 7