The initial public offering (IPO) of Dr Agarwal's Health Care managed to sail through on the third and final day of the bidding process, thanks to the QIB push. The issue was overall subscribed only 7 per cent on day one and ended day two with a little more than 40 per cent subscription.
Dr Agarwal's Health Care is selling its shares in the price band of Rs 382-402 apiece. Investors can apply for a minimum of 35 shares and its multiples thereafter. It is looking to raise Rs 3,027.26 crore via IPO, which includes a fresh share sale worth Rs 300 crore and an offer-for-sale (OFS) of up to 6,78,42,284 equity shares.
According to the data, the investors made bids for 7,37,43,215 equity shares, or 1.38 times, compared to the 5,35,26,172 equity shares offered for the subscription by 3.00 pm on Friday, January 31, 2025. The three-day bidding for the issue, which kicked off on Wednesday, January 29, shall today.
The allocation for qualified institutional bidders (QIBs) was subscribed 4.19 times, while the portion reserved for retail investors saw a subscription of 335 per cent. The quota set aside for non-institutional investors (NIIs) saw bids for 30 per cent at the same time. However, portions allocated towards employees and shareholders were booked 24 per cent and 39 per cent, respectively.
Incorporated in 2010, Chennai-based Dr Agarwal's Health Care offers a comprehensive range of eye care services, including cataract and refractive surgeries, consultations, diagnoses, non-surgical treatments, and the sale of optical products, contact lenses, accessories, and eye care-related pharmaceutical items.
The grey market premium (GMP) of Dr Agarwal's Health Care has seen a sharp correction on the back of dull bidding for the issue. Last heard, the company was commanding no grey market premium, suggesting a flat listing for the investors. The GMP in the unofficial market stood around Rs 50 before the issue kicked off for bidding.
Brokerage firms are mostly positive on the issue but for a long-term perspective. The rising demand of eye-care services and health needs, asset light model, experienced management and growth potential are the key positives for the issue. However, rich valuations, high proportion of OFS and stiff competition are major concerns for the issue.
Dr Agarwal’s Health Care is valued at FY24 EV/Ebitda multiple of 33.9 times at upper end of price band on post issue capital. The company in its previous 2 years has reported 38 per cent, 41 per cent and 48 per cent CAGR in revenue, Ebitda and PAT to Rs 1,332 crore and Rs 362 crore and Rs 95 crore, respectively, said SBI Securities.
"While comparing the stock with its close peers, the issue appears to be fairly priced on valuation and financial parameters. We recommend investors to subscribe to the issue at a cut-off price for long term investment horizon," it said.
Ahead of its IPO, Dr Agarwal's Health Care raised Rs 875.5 crore via anchor book as it allocated 2.17 crore shares at Rs 402 apiece. It reported a net profit of Rs 39.56 crore with a revenue of Rs 837.94 crore for the six months ended on September 30, 2024. The company shall command a total market capitalization of Rs 12,698.37 crore.
The company has reserved 15,79,399 shares worth Rs 63.49 crore for the eligible employees of the company, while 11,29,574 shares have been reserved for the shareholders of Dr Agarwal's Eye Hospital Ltd. Of the net offer, 50 per cent shares are reserved for qualified institutional bidders (QIBs), while non institutional and retail bidders will get 15 per cent and 35 per cent allocation, respectively.
We believe India’s eye care market is expected to grow at a CAGR of 11.5 per cent, presenting significant opportunities for the company to deepen its footprint in underserved regions. We believe its organic growth strategy and focus on expanding the primary facility network position it well to capture this growing demand, said Mehta Equities with a 'subscribe' for long-term rating.
Kotak Mahindra Capital Company, Morgan Stanley India Company, Jefferies India, Motilal Oswal Investment Advisors are the book running lead managers of Dr Agarwal's IPO, while Kfin Technologies is the registrar for the issue. Its shares shall be listed on both BSE and NSE likely on February 4, Tuesday.