MedPlus Health IPO opens for subscription on 13 December and the last bidding date is 15 December. The price band for the issue has been fixed at INR 780-796 per equity share. The issue is scheduled to list on 23 December 2021. MedPlus Health GMP is currently at INR 300 per share, which makes it almost 40% of the issue price.
The public issue consists of fresh issue of shares worth INR 600 crore and an offer for sale (OFS) worth INR 798.29 crore that makes the IPO worth INR 1,398.29 crore. Several brokerage houses have come out with MedPlus Health IPO recommendations.
MedPlus Health IPO Analyst Reviews
Angel One is among the brokerage houses with positive MedPlus Health IPO recommendations and analyst highlighted the following points:
- MedPlus is the second largest pharmacy retailer in India, in terms of the number of stores as of 31 March 2021, and in terms of revenue from the operations.
- Adding value proposition to the customer in terms of 2-hour delivery, competitive pricing and a wide range of Pharmaceutical and FMCG products.
- Medplus is the first pharmacy retailer in India to offer an omnichannel platform i.e. customers can visit the stores or place the order online by mobile application or website.
Nevertheless, the brokerage house also noted that the company got some benefit of Covid related revenue in 2021 and in H1FY2022 and once Covid revenue normalizes, it may be difficult for the company to have double-digit revenue growth. The company may also face certain challenges to expand its retail chain in other geographies.
Elite Wealth has also given the upcoming IPO a subscribe rating and shared pros and cons.
- The company has been able to build strong brand presence among its customer, as customer gets the surety of getting genuine product from this channel.
- Many deep pocket players like Tata, Reliance are entering this space through acquisition, so company may find it difficult to gain market share.
SMC was more conservative in its approach and ranked the IPO 2.5/5 and listed out the following reasons:
- There have been instances of negative cash flows in the last three financial years.
- Changes in prescription drug pricing and commercial terms could adversely affect its operations
- The company relies on third-party manufacturers for the supply of its products.
Among the positive factors, the brokerage house noted the company’s excellent reach, brand and value proposition, and high-density store network.
Negative MedPlus Health IPO Recommendation – Canara Bank Securities
Canara Bank Securities also has a negative view on the offer and finds it expensive, although it noted that the company’s business is scalable with Omni channel business model.
- Due to COVID pandemic, online channels are getting traction. Hence, success of Conventional business model such as MedPlus depends on their transition towards digital channel.
- On valuation front, the issue appears expensive at P/E 132.89x and P/B of 11.62x in FY2021. Thus, we recommend to avoid the issue”
MedPlus Health IPO Recommendation – BP Wealth
BP Wealth has accorded a Subscribe rating to the IPO while noting the following points:
- Consistently delivering compelling customer value proposition
- Successful track record of expansion
- Pharmacy retail is the fastest-growing in the overall retail space with an expected growth rate of 25% CAGR over FY20-25 (as per Technopak Report), which is a positive for players like MedPlus
- There have been instances of negative cash flows in the last 3 financial years, which is concerning for the business.
- Their operations are subject to high working capital requirement and have incurred substantial indebtedness. Their inability to maintain an optimal level of working capital or financing required may impact their operations adversely.
MedPlus Health GMP in healthy state
As noted above, MedPlus Health GMP is in a healthy range and the positive aspect is that premiums have remained in a tight range of INR 280 – 320 per share despite volatility in wider markets. While positive MedPlus Health GMP is hardly a reason to invest, these movements indicate that traders in grey market have got a high degree of trust in the company’s offer.