Why investors should blink twice before investing in this IPO: Have a look!
The company held a market share of approximately 25 per cent in the organised eye care service chain business in India during FY24.
About the Issue
Dr Agarwal's Health Care Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
January 29, 2025 |
| IPO Closing Date |
January 31, 2025 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Re 1 per equity share |
| IPO Price |
Rs 382 to Rs 402 per equity share |
| Min Order Quantity |
35 shares |
| Listing At |
BSE, NSE |
| Total Issue |
7,53,04,970 shares of FV Re 1* |
| (Aggregating up to Rs 3,027.26 Cr)* |
| Fresh Issue |
74,62,686 shares of FV Re 1* |
| (Aggregating up to Rs 300.00 Cr)* |
| Offer for Sale |
6,78,42,284 shares of FV Re 1* |
| (Aggregating up to Rs 2,727.26 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Repayment/prepayment, in part or full, of certain of the borrowings.
2. General corporate purposes and unidentified inorganic acquisition.
Promoter holding
Dr Amar Agarwal, Dr Athiya Agarwal, Dr Adil Agarwal, Dr Anosh Agarwal, Dr Ashvin Agarwal, Dr Ashar Agarwal, Dr Amar Agarwal Family Trust, Dr Adil Agarwal Family Trust, Dr Anosh Agarwal Family Trust, Dr Ashvin Agarwal Family Trust, Dr Ashar Agarwal Family Trust, Dr Agarwal’s Eye Institute and Dr Agarwal's Eye Institute Pvt Ltd are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 37.16 per cent in the company.
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Company profile
The company offers a comprehensive range of eye care services, including cataract, refractive, and other surgeries, as well as consultations, diagnoses, and non-surgical treatments. Under its product segment, it sells a variety of glasses, lenses, contact lenses, frames, and eye care-related pharmaceutical products, as prescribed by its doctors.
According to the CRISIL MI&A Report, the company held a market share of approximately 25 per cent in the organized eye care service chain market in India during FY24.
Committed to addressing all aspects of a patient's eye care journey, the company operates a network of 209 facilities as of September 30, 2024. In FY24, it served 2.13 million patients and performed 220,523 surgeries. During the first half of FY25 (ending September 30, 2024), it served 1.15 million patients and performed 140,787 surgeries.
The company expanded internationally in 2012 and, as of September 30, 2024, operates 16 facilities across nine African countries.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
H1FY25 |
| Revenue |
714 |
1,031 |
1,376 |
838 |
| Profit Before Tax |
57 |
84 |
141 |
60 |
| Net Profit |
43 |
103 |
95 |
40 |
While the company has consistently showcased notable revenue growth over the past few years, its profitability has remained erratic. The management attributed the setback in FY24, despite higher other income, to deferred tax provisioning, increased finance costs, and other one-time adjustments.
As of September 30, 2024, the company reported total borrowings amounting to Rs 374 crore. The profit for FY24 fell short of FY23 levels, and annualized figures from H1FY25 indicate a 16 per cent decline in profit compared to FY24.
Valuation & Returns
| Company Name |
P/E |
P/B |
RoE (%)* |
| Dr. Agarwal's Health Care Ltd |
160 |
7 |
9 |
| Listed Peers |
| Apollo Hospitals Enterprise Ltd |
82 |
13 |
14 |
| Max Healthcare Institute Ltd |
97 |
12 |
13 |
| Fortis Healthcare Ltd |
71 |
6 |
9 |
| Global Health Ltd |
58 |
9 |
18 |
| Narayana Hrudayalaya Ltd |
34 |
8 |
32 |
| Krishna Institute of Medical Sciences Ltd |
73 |
12 |
19 |
|
Aster DM Healthcare Ltd
|
88 |
7 |
5 |
| Rainbow Children's Medicare Ltd |
64 |
11 |
19 |
The issue is priced with a P/BV ratio of 7.63 times, calculated using its Net Asset Value (NAV) of Rs 52.72 as of September 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 7.11 times, considering its post-IPO NAV.
Considering the company's annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio is calculated at around 160x. Even after factoring in the FY24 earnings, the P/E ratio stands at 130x, making the issue excessively overpriced compared to its listed peers.
On the other hand, the company reported a modest return on equity (RoE) of 9 per cent for FY24, ranking among the lowest in its peer group, barring one or two exceptions. This significantly diminishes its investment appeal.
Outlook
Although the Indian eye care industry is expected to grow at a CAGR of 12 per cent to 14 per cent between FY24 and FY28, and the company holds a strong market share, concerns remain regarding its bottom-line growth. Over 90 per cent of the issue proceeds are allocated to promoters, with the majority of the net proceeds from the fresh issue earmarked for loan repayment rather than business expansion. Additionally, there are listed peers available at lower valuations offering better returns.
Therefore, we recommend investors avoid this issue at present.