Krsnaa Diagnostics Limited opened its initial public offering (IPO) on August 4 and saw a healthy response from investors. The issue was subscribed a total of 1.98 times on the first day of bidding by approximately 17:00 IST, on August 4. The Krsnaa Diagnostics IPO received bids for 1.41 crore equity shares against the offer size of 71.12 lakh equity shares according to subscription data on the exchange. The company’s issue size has been reduced to 71.12 lakh shares from the earlier 1.27 crore equity shares. This comes after the company managed to raise Rs 537 crore from the anchor investors on the day before the IPO opened, on August 3.
Retail investors saw the most subscriptions to the issue out of all the investor categories. The retail investor had subscribed a total of 9.59 times to the issue against their reserved portion. The qualified institutional buyers (QIBs) on the other had subscribed 0.48 times. The non-institutional investors (NIIs) had subscribed 0.15 times against their reserved portion. The IPO also saw employees subscribe to the issue at 0.21 times the reserved amount.
These subscription numbers come against reserved investor portions that are as follows –The retail portion had the smallest reservation at 10 per cent, while the QIBs and NIIs had a 75 per cent allocation and a 15 per cent reservation respectively.
Krsnaa Diagnostics has an issue size of Rs 1,213.33 crore with a fresh issue worth Rs 400 crore. It also consists of an offer for sale (OFS) that aggregates up to Rs 813.33 crore with 8,525,520 equity shares with a face value of Rs 5 per equity share. The shares under the OFS include shareholdings by PHI Capital Trust, Kitara and Somerset Indus Healthcare Fund. The price band for the issue stands at Rs 933 to Rs 954 per equity share.
The grey market premium (GMP) for the issue stood at Rs 450 on August 5 at around 08:25 IST. This indicated that the shares were trading at Rs 1,383 to Rs 1,404 per equity share on the unlisted market.
Speaking on the financial situation of Krsnaa Diagnostics Geojit said in a note, “Revenue from sale of service to public health agencies in PPP model was 67 per cent of the total revenue from operations in FY21 while the rest came from non-government customers (33 per cent) such as private medical colleges, private laboratories etc. The net revenue from operations increased at a CAGR of 37.6 per cent from Rs.209.2 crore in FY19 to Rs.396.5 crore with 41% revenue from radiology services and 59 per cent from pathology in FY21.”
The company plans to use the proceeds from this public issue to establish new diagnostics centres in Punjab, Karnataka, Himachal Pradesh, and Maharashtra. The rest of the funds will go towards repayments and pre-payments on company borrowings, while the rest is used for general corporate purposes. The basis of allotment will likely take place on August 11. The listing date is not yet confirmed but it will likely happen on August 17.
Adding to the subscription recommendation, Geojit also mentioned, “At the upper price band of Rs.954, KDL is available at a P/E of 95x (diluted) which appears highly expensive compared to peers. Considering its unique business model with cost advantage and plans for standalone centres, the company’s revenue visibility for the future looks promising. We provide “Subscribe” on a short term view for listing gain.”
With that said, keep in mind that there are some risks as a major chunk of the company’s revenue depends on payments under contracts with public health agencies. This portion is around 67.5 per cent said Geojit. The company has also reported negative net worth and losses in the past, according to the Geojit note.
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