MedPlus Health Services IPO | The issue of the pharmacy retailer had seen strong demand as investors subscribed the IPO about 53 times
MedPlus Health Services is likely to clock a premium of at least 15 percent over its issue price as India’s second-largest retail pharmacy chain makes its public market debut on December 23.
Experts put down the premium performance to strong financials and business model as well as expected expansion in a growing organised retail pharmacy market. However, they are not ruling out some impact from market volatility on the listing.
The initial public offering of the pharmacy retailer saw strong demand as investors subscribed the IPO about 53 times during December 13-15. Qualified institutional buyers’ portion was booked 112 times, followed by non-institutional investors, 85 times.
Retail investors and employees also showed good interest in the issue, buying 5.23 and 3.05 times the shares set aside for them, respectively.
The Rs 1,398 crore IPO consisted of a Rs 600 crore fresh issue and an offer for sale by selling shareholders of Rs 798.3 crore. The company will use money from the fresh issue for working capital requirements of subsidiary Optival Health Solutions.
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Considering strong demand from qualified institutional buyers and wealthy persons, Mehta Equities’ vice-president for research Prashanth Tapse expects a healthy listing at around Rs 975 plus, which translates to a premium of 22 percent over the upper end of the IPO price band.
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“Healthy listing gains seem to be justified even though the issue was aggressively priced considering the firm’s pan-India business network and diversified range of products including pharmaceutical, wellness and fast-moving consumer goods which give strong long-term visibility,” Tapse said. “Overall we believe Indian organised retail pharmacy is still at a nascent phase and there are expectations to deliver exponential growth in the long run,” he added.
Astha Jain, senior research analyst at Hem Securities, is expecting MedPlus to list at more than 15 percent premium.
Grey Market Premium
The grey market price of MedPlus stood at Rs 946-976 per share, translating to a premium of Rs 150-180 or 18-22 percent over the final IPO price of Rs 796 per share, as per IPO Watch and IPO Central. However, this grey market price is down from Rs 1,096 per share traded on the day of opening of IPO due to weakness in secondary markets.
“MedPlus is expected to list at a premium as suggested by the grey market premium. However, the grey market premium has dropped due to volatile market conditions which could be an opportunity for investors to make fresh entries in the stock,” said Swapnil Shah, head of research at BP Wealth.
Financials
The company has delivered solid financial performance and plans to further strengthen its market position by ramping up store penetration.
MedPlus recorded significant growth in profit at Rs 63 crore for financial year 2020-21 compared to Rs 1.8 crore in the previous year. Revenue increased to Rs 3,069 crore from Rs 2,870.6 crore during the period.
Profit for the six-month period ended September 2021 stood at Rs 66.4 crore, a jump of almost three times from Rs 22.3 crore a year ago. Revenue jumped to Rs 1,879.9 crore from Rs 1,462 crore in the period.
According to Akhilesh Jat, pharma analyst at CapitalVia Global Research, MedPlus is expected to list nearly at Rs 950 per share as the IPO subscription status may reflect on the listing date as well.
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Founded in 2006, MedPlus offers a wide range of products including pharmaceutical and wellness products, medicines, home and personal care products, baby care products, soaps and detergents, and sanitisers.
The company has maintained a strong focus on scaling up its store network, having grown from the initial 48 stores in Hyderabad to India’s second-largest pharmacy retail network of over 2,000 stores across Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal and Maharashtra as of March 2021.
