Medplus Health Services Limited IPO: Date, Price, GMP, Review & Details

Rating SUBSCRIBE Issue Offer Issue Opens on Dec 13, 2021Issue Close on Dec 15, 2021Total IPO size (cr) 1,398.30Fresh issue (cr) 600.00Offer For Sale (cr) 798.30Price Band (INR) 780-796Market Lot 18Face Value (INR) 2Retail Allocation 35%Listing On NSE, BSE

‍Objects of the issue

‍⮚ For funding working capital requirement of the subsidiary.

⮚ For general corporate purposes. Issue Break-up (%)QIB Portion 50NIB Portion 15Retail Portion

⮚ Shareholding (No. of Shares)Pre Issue 111,761,165Post Issue 119,305,676

‍Indicative Timetable

‍Finalisation of Basis of Allotment 20-12-2021Refunds/Unblocking ASBA Fund 21-12-2021Credit of equity shares to DP A/c 22-12-2021Trading commences 23-12-2021

Incorporated in 2006, Medplus Health Services is India's second-largest pharmacy retailer in terms of the number of stores and revenue.

The company offers pharmaceutical and wellness products i.e. medicines, vitamins, medical devices, test kits, and fast-moving consumer goods i.e. home and personal care products, baby care products, sanitisers, soaps, and detergents, etc.

It is also the first pharmacy retailer in India to offer an omnichannel platform wherein customers can purchase products through stores, place orders over the telephone, online orders, and a Click and Pick facility.

⮚ According to the Technopak Report, it is India's first pharmaceutical retailer to offer an omnichannel platform. This approach aims to broaden and expand the Company's client base while also enhancing "convenience" as a primary customer value proposition and retaining customers inside its ecosystem.

⮚ As of September 30, 2021, we operated 546 stores in Karnataka, 475 stores in Tamil Nadu, 474 stores in Telangana, 297 stores in Andhra Pradesh, 224 stores in West Bengal, 221 stores in Maharashtra and 89 stores in Odisha.

⮚ The company has an established track record of delivering strong financial performance. Between the financial year 2019 and financial year 2021, total revenue from operations grew at a compound annual growth rate (“CAGR”) of 16.21% from ₹22,727.37 million to ₹30,692.69 million.

⮚ The company’s business operations across the entire value chain are backward integrated and are wholly managed and operated by itself. The company's operations are supported by its technology-driven supply chain and distribution infrastructure, which is arranged in a hub-and-spoke model and gives it a strong foundation and substantial power to continue to grow.

Outlook & Valuation:

Over the period of FY19 to FY21, company revenue increased from Rs 2,284.94 crore to Rs 3,090.81 crore, while profits grew from Rs 11.92 crore in FY19 to Rs 63.11 crore in FY21 with only a slight dip in FY20.

Margins of the company are increasing slowly.

The company is the second-largest pharmacy retailer in India which offers an omnichannel platform. After a dismal performance for FY20, the company posted super earnings recently.

The company has low margins, but it is expanding. We believe that there are growth opportunities in the industry and might perform better over the period. There are no listed peers and IPO is arriving at a PE of 71x to its annualized FY22 earnings.

Prima-facie the valuation looks expensive but over the period of time, we believe the company's growth may justify its valuation.

IPO Note

MEDPLUS HEALTH SERVICES LIMITED

KEY MANAGERIAL PERSONNEL

⮚ Ganga Madhukar Reddy is the Managing Director and Chief Executive Officer of the Company. He is one of the Promoters of the Company and has been a Director of the Company since its incorporation on November 30, 2006. He holds a bachelor’s degree in medicine and surgery and a master’s degree in business administration.

⮚ Cherukupalli Bhaskar Reddy is the Chief Operating Officer – outlet operations of the company. He joined the company on March 1, 2007. He has over 14 years of experience in the pharmaceutical industry.

⮚ Surendranath Mantena is the Chief Operating Officer – MedPlus Mart of the company. He joined the company on October 1, 2010.

⮚ Hemanth Kundavaram is the CFO of the company. He joined the company on January 2, 2021. He has over 15 years of experience in corporate finance and accounting in various industries.

⮚ Parag Jain is the company secretary and compliance officer of the company. He joined the company on March 10, 2014. He has 14 years of experience as a company secretary.

⮚ Atul Gupta is the Non-Executive Director of the company. He has over 13 years of experience in the investment industry.

⮚ Murali Sivaraman is the Non-Executive Independent Director of the company. He was previously associated with Philips Lighting.

COMPETITIVE STRENGTHS

⮚ India’s Second Largest Pharmacy retailer Company.

⮚ Strong brand name and customer value proposition.

⮚ Successful Track Record of Expansion Using a Distinct Cluster-based and Replicable Store Unit Expansion Approach

⮚ High-Density Store Network Enhancing Omni-channel Proposition

⮚ Lean Cost Structure and Technology-Driven Operations

⮚ Well Qualified, Experienced and Entrepreneurial Board and Senior Management Team

⮚ Strong promoter background and an experienced and entrepreneurial management team

BUSINESS STRATEGIES

⮚ Strengthen the Market Position by Increasing Store Penetration in Existing Clusters and Developing New Cluster

⮚ Further Develop the Omni-channel Platform with a Hyper-local Delivery Model

⮚ Increase the Share of Private Labels and Enhance the Stock Keeping Unit (“SKU”) Mix

⮚ Continue to Increase Operating Efficiency and Enhance Supply Chain Management to Drive Profitability

⮚ Enhance Revenue and Increase Customer Wallet Share.

KEY CONCERNS

⮚ Changes in prescription medicine prices and commercial terms may have a negative impact on their business.

⮚ Their company, subsidiaries, promoters, and directors are involved in ongoing legal procedures.

⮚ Privacy and security rules govern the use and sharing of personally sensitive information, especially personal health information.

⮚ Their financial success may be harmed if they will not effectively manage inventory and forecast demand.

⮚ Any negative news or occurrence related to the Indian pharma industry may have a negative impact on their business.

IPO Note

MEDPLUS HEALTH SERVICES LIMITED

COMPARISON WITH LISTED INDUSTRY PEERS

There are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison in relation to the Company

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions) FY 2021 FY 2020 FY 2019 Equity Share Capital 4.48 1.94 1.94Other Equity 7,301.05 5,276.08 2,911.43 Net Worth 7,305.53 5,278.02 2,913.37 Total Borrowings 1,352.35 1,050.51 1,044.02 Revenue from Operations 30,692.69 28,706.03 22,727.37 EBITDA 2,382.13 1,509.62 1,313.47 Profit Before Tax 950.98 293.59 227.51 Net Profit for the year 631.11 17.94 119.22

DISCLAIMER:

^{The information contained herein are strictly confidential and are meant solely for the information of the recipient and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written permission of Swastika Investmart Ltd. (“SIL”). The contents of this document are for information purpose only. This document is not an investment advice and must not alone be taken as the basis for an investment decision. Before taking any decision to invest, the recipient of this document must read carefully the Red Herring Prospectus (“RHP”) issued to know the details of IPO and various risks and uncertainties associated with the investment in the IPO of the Company. All recipients of this document must before acting on the given information/details, make their own investigation and apply independent judgment based on their specific investment objectives and financial position. They can also seek appropriate professional advice from their own legal and tax consultants, advisors, etc. to understand the risks and investment considerations arising from such investment. The investor should possess appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any decisions on the investment. The Investor shall be solely responsible for any action taken based on this document. SIL shall not be liable for any direct or indirect losses arising from the use of the information contained in this document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and the investor would be doing so at his/her/its own risk. The information contained in this document should not be construed as forecast or promise or guarantee or assurance of any kind. The investors are not being offered any assurance or guaranteed or fixed returns on their investments. The users of this document must bear in mind that past performances if any, are not indicative of future results. The actual returns on investment may be materially different than the past. Investments in Securities market products and instruments including in the IPO of the Company are highly risky and they are generally not an appropriate avenue for someone with limited resources/ limited investment and low risk tolerance. Such Investments are subject to market risks including, without limitation, price, volatility and liquidity and capital risks. Therefore, the users of this document must carefully consider all the information given in the RHP including the risks factors before making any investment in the Equity Shares of the Company.Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.CORPORATE & ADMINISTRATIVE OFFICE - 48, Jaora Compound, M.Y.H. Road, Indore - 452 001 | Phone 0731 - 6644000Compliance Officer: Ms. Sheetal Duraphe Email: compliance@swastika.co.in Phone: (0731) 6644 241Swastika Investmart Limited, SEBI Reg. No. : NSE/BSE/MSEI: INZ000192732 Merchant Banking: INM000012102 Investment Adviser: INA000009843 MCX/NCDEX: INZ000072532 CDSL/NSDL: IN-DP-115-2015 RBI Reg. No.: B-03-00174 IRDA Reg. No.: 713.}

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