Here’s why analysts believe ₹100 crore IPO of Dr Trust’s parent Nureca is a ‘sizeable’ opportunity

• The ₹100 crore IPO of healthcare and wellness products distributor Nureca is now open for public subscription.
• The company sells products such as blood pressure monitors, pulse oximeters, thermometers, nebulizers, self-monitoring glucose devices under the brand name Dr Trust.
• The best thing, according to investment experts about the Nureca business, is its asset-light business model.
• According to Reliance Securities, “Nureca financials are quite encouraging.”
• Check out the latest news and updates on Business Insider.

The ₹100 crore initial public offering (IPO) of healthcare and wellness products distributor Nureca Limited is now open for public subscription. The issue will remain open till February 17, making it the sixth IPO of 2021.

Incorporated in 2016, the company engages in the business of home healthcare and wellness products. It sells blood pressure monitors, pulse oximeters, thermometers, nebulizers, and self-monitoring glucose devices under the brand name Dr Trust.

The best thing, according to investment experts about the Nureca business, is its asset-light business model. They enter into agreements with vendors who manufacture the products as per the specifications. This allows Nureca to quickly scale its operations at a predetermined cost without incurring any capital expenditure on manufacturing facilities.

Streets View: Nureca IPO

All you need to know about Nureca IPO:

• Nureca will utilize issue proceeds for funding incremental working capital requirements and general corporate purposes.
• Investors can bid for a minimum of 35 equity shares and in multiples of 35 shares thereafter.
• The price band for the public issue has been fixed at ₹396-400 per share.
• The issue includes a reservation of ₹1 crore worth of shares for employees. And, the eligible employees will get shares at a discount of ₹20 per share.
• ITI Capital Ltd is the sole book-running lead manager, and Link Intime India Private is the registrar to the issue.

Attractively priced IPO, healthy financials, positive industry outlook and much more — here’s what analysts have to say about the IPO

Attractively priced IPO and industry deemed to grow

According to a Reliance Securities report, the company operates in a highly fragmented market. Given the massive opportunity in the Home Healthcare segment, the growth momentum is expected to sustain in subsequent years. The Home Healthcare market in India and neighbouring countries was pegged at ₹20800 crore in 2019, and it is expected to grow to ₹38,900 crore by 2025 at a compound annual growth rate (CAGR) of 11%.

“IPO is valued at 5.6x annualized earnings report in 1HFY21, which looks to be attractively valued given the high asset turnover and return ratio of the company,” the report added.

There are no listed peers, and therefore the benchmark valuation is difficult to ascertain.

Asset light business model helps penetrating new geographies and keeps it capital efficient

According to the Axis Securities report, the asset-light business model does not require Nureca to invest heavily in physical assets such as plant and machinery, land and property, which allows them to be capital efficient.

The business model is scalable, such that they can expand their geographical reach and distribution capacity and add new products efficiently and at a relatively low cost without disrupting their existing business.

The impressive financials

According to Reliance Securities, “Nureca financials are quite encouraging.” While the company’s revenue recorded 122% CAGR over the past three fiscals, its net profit grew by 44% CAGR during the same period.

More importantly, the earnings before interest, taxes, depreciation, and amortization (EBITDA) and profit became almost 5.7x in the second quarter ended September 30, compared to FY20 performance.

E-commerce to expedite growth

The company is considered as the first digital company to sell such products through its website (drtrust.in) and other online partners. Most of the product lines support India's home health market, making it a one-stop solution provider. Dr Trust is known for its innovative products in the market, and, with the segment showing significant potential for growth.

According to GEPL Capital, “the diversified portfolio range, growth in the home healthcare segment and higher online channel mix are estimated to drive profitability in the years to come.”

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