Krsnaa Diagnostics IPO: All You Need To Know
Krsnaa Diagnostics Ltd. will launch its Rs 1,213-crore initial public offering on Wednesday as private equity investors look to pare holdings and the company aims to expand, lower borrowings.
The diagnostics services provider will sell its shares at Rs 933-954 apiece, seeking a market value of Rs 2,994 crore at the upper end of the price band. The IPO, according to its red herring prospectus, comprises a fresh issue of Rs 400 crore and a Rs 813.3-crore offer-for-sale by private equities.
PHI Capital Trust-PHI Capital Growth Fund-I will sell 16 lakh shares.
Kitara PIIN will sell 33.4 lakh shares.
Somerset Indus Healthcare Fund-I Ltd. will sell 35.6 lakh shares.
Lotus Management Solutions (acting through Mayur Sirdesai) will sell 21,380 shares.
The promoter shareholding will fall to 27.4% after the IPO from 31.6%, while the rest will be held by the public. Before the float, however, promoters had raised their holding in the company by 3.8% via rights issue priced at par face value of Rs 10. Subsequently, the company has split its shares into two of Rs 5 each.
JM Financial, DAM Capital Capital, Equirus and IIFL Securities are the book-running lead managers to the issue.
Issue Opens On: Aug. 4.
Issue Closes On: Aug. 6.
Face Value: Rs 5 per share.
Lot Size: 15 shares and multiples.
Listing: BSE and NSE.
The company plans to use Rs 150 crore to set up 29 diagnostic centres across Punjab, Maharashtra, Karnataka and Himachal Pradesh.
It also plans to repay/ pre-pay debt worth Rs 146 crore to the lenders in the current financial year. The company’s total borrowings stood at Rs 231.7 crore as of March 2021.
Krsnaa Diagnostics provides technology-enabled services such as imaging (including radiology), pathology/clinical laboratory and tele-radiology to public and private hospitals, medical colleges and community health centres across India.
The company has public-private partnerships in 14 states. It has 1,823 diagnostic centres, with the largest presence in Maharashtra, Karnataka and Rajasthan. These states account for 690 centres, or 29% of the total diagnostic footprint. It plans to expand into Punjab with 24 centres.
The company also participates in government tenders under the National Health Mission.
The tenders allow the company to operate for a period of up to 12 years within the premises of district hospitals and provide imaging and radiology at fixed price, a subsidised rate compared to the private sector, Yash Mutha, executive director at Krsnaa Diagnostics, told BloombergQuint in an interview. The contract, he said, allows for price hikes of 2.5-5.5% per year to capture cost escalations.
Since commencement of operations, the company has received 77.59% of all tenders bid. As on June 30, 2021, it has deployed 1,797 diagnostic centres pursuant to PPPs.
Krsnaa Diagnostics saw its revenue from operations jump 53.41% over the year earlier to Rs 396.45 crore in the fiscal ended March 2021. Of this, nearly Rs 147 crore was linked to Covid-related diagnostic tests during the year.
This revenue gap, Mutha said, is likely to be filled in with existing diagnostic centres in the ongoing fiscal.
The company generated Rs 267.57 crore, or 67.49% of its revenue from operations, from public health agencies.
It reported Ebitda worth Rs 93.82 crore in FY21 compared with Rs 62.81 crore in a year earlier, excluding impact of fair value movement of compulsory convertible preference shares. FY21 saw a fair value gain compared with a loss in the previous two years. Ebitda margin stood at 23.7% during the year compared with 24% in FY20.
Adjusted for fair value and deferred tax arising out of it, net profit for FY21 stood at Rs 31.4 crore compared with Rs 13.53 crore in the year earlier.
Krsnaa Diagnostics has listed peers such as Metropolis Healthcare Ltd. and Dr. Lal PathLabs Ltd.
The Covid-19 pandemic may significantly affect operations, financials and cashflows in the current year.
A substantial portion of its revenue from operations depends on payments under contracts with public health agencies. If it fails to negotiate and retain similar fee arrangements, and if contracts are cancelled, its business may be adversely affected.
Most of its diagnostic centres have been established and are operated under public-private partnerships awarded by the government agencies through a competitive bidding process. There can be no assurance that it will qualify for, or that it will successfully compete and win such tenders.
The prices that it can charge for diagnostic services are dependent on recommended or mandatory fees fixed under the terms of the agreements entered into with public and private healthcare providers.