Vijaya Diagnostic Centre IPO: Should you subscribe?

Specialty chemical firm Ami Organics and healthcare chain Vijaya Diagnostic Centre hit the primary market on Wednesday with their initial share sale to raise a total of Rs 2,465 crore. This comes after eight companies, including Devyani International, Nuvoco Vistas Corporation and CarTrade Tech, floated their initial share-sales last month to mobilise Rs 18,243 crore. Brokerage Ventura Securities is positive on both of these public share sale. In an interaction with Money9, Vinit Bolinjkar, head of research, Ventura Securities, said both the businesses are very good. He added that Vijaya Diagnostic might look optically expensive in terms of valuations, but the margins are the best among its peers.

Expert view

“One should invest in Vijaya Diagnostics not only for listing gains. Investors can keep this stock in their portfolio for long-term also,” said Bolinjkar.

Vijaya Diagnostic’s IPO is entirely an offer for sale of 35,688,064 equity shares by the promoter, S Surendranath Reddy and investors Karakoram Ltd and Kedaara Capital Alternative Investment Fund-Kedaara Capital AIF I.

As a part of the offer for sale, Reddy will sell 50.98 lakh equity shares, Karakoram will offload 2.95 crore equity shares and Kedaara Capital will divest 11.02 lakh shares. The initial share-sale will see stake dilution of 35% by the promoter and existing shareholders. At present, promoter and promoter group own 59.78% shareholding in the company. This included Reddy’s 37.78% stake. Karakoram and Kedaara Capital hold 38.56% and 1.44% stake, respectively, in Vijaya Diagnostic.

The company has fixed a price band of Rs 522-531 a share for its IPO. At the upper end of the price band, the initial share-sale is expected to fetch about Rs 1,895 crore. Vijaya Diagnostic Centre offers a one-stop solution for pathology and radiology testing services to customers through its extensive network, which consists of 80 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana and Andhra Pradesh, and the National Capital Region and Kolkata.

On the other hand, the IPO of Ami Organics comprises fresh issue of equity shares worth Rs 200 crore and an offer for sale of up to 6,059,600 equity shares by existing shareholders. The company has reduced its fresh issue size to Rs 200 crore from Rs 300 crore after raising Rs 100 crore in a pre-IPO placement. The price band has been set at Rs 603-610 a share for the public issue. At the upper end of the price band, the initial share-sale is expected to fetch Rs 569.63 crore. Proceeds from the fresh issue will be used towards repayment of certain debt and funding working capital requirements.

“The company is into high growth fast-growing segments. Pro-active management and the company is future-ready as most of the capex has already been done. This company is well set for good prospects in the future. You can apply for listing and one can accumulate the stock on decline later on,” said Bolinjkar.

Ami Organics is one of the leading R&D driven manufacturers of specialty chemicals with varied end usage, focussed on the development and manufacturing of pharma intermediates for regulated and generic APIs (active pharmaceutical ingredients) and NCE (new chemical entity) and key starting material for agrochemical and fine chemicals.

The equity shares of both companies will be listed on BSE and NSE.

Since the beginning of the ongoing financial year, a total of 20 companies have raised more than Rs 45,000 crore through initial public offers. This is higher than Rs 31,277 crore raised by 30 firms in the entire 2020-21.