Dr Agarwal's Health Care IPO Day 2: Check subscription status so far, GMP and new listing date

The initial public offering (IPO) of Dr Agarwal's Health Care continued to attract a muted response from the investors during the second day of the bidding process as QIB and HNI bidders, kept at bay. The issue, which kicked off on Wednesday, January 29, was overall subscribed only 7 per cent on day one.

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 2,04,57,570 equity shares, or 38 per cent, compared to the 5,35,26,172 equity shares offered for the subscription by 1.45 pm on Thursday, January 30, 2025. The three-day bidding for the issue shall conclude on Friday, January 31.
 

The quota set aside for qualified institutional bidders (QIBs) subscribed 95 per cent. The allocation for retail investors was subscribed 20 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of nine per cent. Portions allocated towards employees and shareholders were booked 15 per cent and 22 per cent, respectively as of the same time.

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 a premium of merely Rs 5 per share in the unofficial market, suggesting a flat listing for the investors. The GMP stood around Rs 160 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 ‘hub-and-spoke’ model categorizes facilities as primary (nonsurgical), secondary (surgical), and tertiary (super-specialty). This model supports high patient volumes and economies of scale, enhancing accessibility and efficiency, said Geojit Financial Services. Leveraging the hub-and-spoke and asset-light approach, the network grew from 91 to 193 facilities in India, it said.

"It is available at a P/E of 133.6 times, which appears expensive compared to peers. However, considering the company's plans to expand its presence across India by establishing new facilities, strengthening its brand image, and its consistent revenue growth over the years, we recommend ‘subscribe’ on a long-term basis," Geojit adds.

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 Agarwals 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.

The company has generated a 14.61 per cent return on capital deployed. The pre-IPO P/E ratio is 130.44 times, based on FY24 earnings, which is higher than its peers, said Adroit Financial Services. "Although the valuations are elevated, investors may still choose to 'subscribe' to the IPO, recognizing its potential for sustained growth over the long term," it said.

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.