MedPlus Health Services, the second-largest pharmacy retailer in India, is trading at a 26% premium to the upper end of the issue price band after the close of its initial public offering on December 14, as per data from IPO Watch.
This translates to a trade price of Rs 210; the issue price band is Rs 780-796 per share.
The firm saw a healthy response to its IPO on December 13-14, receiving bids for 66.13 crore shares as against the IPO size of 1.25 crore shares.
The public issue was subscribed 52.6 times, with retail investor subscription at 5.2 times and non-institutional investors’ at 85.33 times. The qualified institutional buyers’ portion received a stellar reception, getting booked 111.9 times.
The company has created scale, store-level efficiency, strong operating metrics, and has a very experienced management team,” said Abhay Agarwal, founder of Piper Serica Advisors.
“In India, organised pharmacy retail is at a nascent stage and is expected to show exponential growth. It fits into the investment criterion of all institutional investors. We expect to see strong institutional buying after listing as well,” he added.
A retailer with an omnichannel presence, MedPlus offers a wide range of pharmaceutical products and fast-moving consumer goods (FMCG), such as medicines, vitamins, medical devices, home, and personal care products.
Angel One, BP Wealth, Geojit Financial, ICICI Direct, Marwadi Shares and Prabhudas Lilladher had a “subscribe” rating for the issue.
“MedPlus, with its clustered store presence, is well-suited to leverage the omni-channel platform with a hyper local delivery model. At the upper price band, it is valued at 43.9x EV/EBITDA and 3.1x EV/sales for FY21,” ICICI Direct said in a note, adding that the subscribe rating was assigned on the basis of its unique business model and decent valuation.
Meanwhile, Angel One said rising competition from offline and online companies like Apollo Pharmacy, Tata 1mg, Netmeds and others could pose risks to the company’s prospects.
The company reported net sales of Rs 3,069 crore in FY21, up 6% from FY20; whereas net profit jumped 28 times to 63.4 crore from 2.2 crore during the period.
According to a report by Technopak, India’s pharmacy retail market is expected to grow at a compound annual rate of 11% between FY21 and FY25, from Rs 1.8 lakh crore to Rs 2.72 lakh crore, while the organised pharmacy retail market’s share is expected to grow at a compound annual rate of 27%, from Rs 20,475 crore to Rs 53,500 crore, in terms of revenue.
Growth in the organised pharmacy retail market will primarily be driven by a combination of structural growth in the underlying market and market share gains from unorganised pharmacy retailers, the research firm said, and analysts believe MedPlus is well-poised to gain from this opportunity.
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