MedPlus Health Services IPO: Information analysis

Incorporated in 2006, MedPlus is the second-largest pharmacy retailer in India in terms of its revenue in FY21 and the number of stores as of March 2021. The company offers a wide range of pharmaceuticals and wellness products, comprising medicines, vitamins, medical devices and FMCG (fast-moving consumer goods), such as home and personal care products, including toiletries, baby-care products, soap and detergents and sanitisers. Starting its journey with 48 stores in Hyderabad, the company subsequently expanded its presence in Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal and Maharashtra. As on September 30, 2021, the company had 2,326 stores in India.

MedPlus follows a cluster-based approach to expand its store. Under this approach, the company opens a number of stores in densely populated areas of a city and then, it expands its stores in the surrounding areas, followed by the expansion of its stores in other adjacent cities. This cluster-based approach is supported with a hub-and-spoke model, which means the company has one major distribution centre for several stores. It helps minimise costs and generate cost efficiency.

Besides, the company claims to be the first retailer to offer an omnichannel platform to its customers. Launched in 2015, its online segment enables customers to shop online and it accounted for almost 9 per cent of its total revenue from operations in FY21.

Strengths

• Its business operations span across the entire value chain with the backward integration of its services. The company procures its inventories directly from pharma companies, which in turn reduces paid commissions, thereby enabling MedPlus to deliver products at better prices to its customers.
• Its cluster-based approach creates brand visibility within the cities it operates, thereby leading to cost efficiency. It manages its own fleet of vehicles and delivery personnel. Also, its supply chain is supported by algorithm-driven automated replenishment and stock picking systems.
• It has a track record of over 15 years and has increased its store count from 635 in FY10 to 2,326 in September 2021.
• The company manufactures products under its private labels through which, it generates more than 10 per cent of its revenues. In-house manufacturing paves the way for the company to generate higher margins.

Risks

• The promoters of the company have pledged 17.7 per cent of their stake in the company on a pre-IPO basis.
• The company has total lease liabilities of Rs 542 crore for its stores, which is more than 55 per cent of its equity.

Also, read about MedPlus Health Services IPO: How good is it? to learn how we evaluate the company on various metrics.

Disclaimer: The authors may be an applicant in this Initial Public Offering