IPO-bound Vijaya Diagnostic is planning more acquisitions in east India to expand business

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IPO-bound Vijaya Diagnostic is planning more acquisitions in east India to expand business
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  • Vijaya Diagnostic IPO is the second diagnostic lab chain to list publicly in recent times after Krsnaa Diagnostics.
  • The IPO of the company will open on September 1 and close on September 3 with a price band of ₹522 to ₹531 per share.
  • The company aims to deepen its presence in Andhra Pradesh, Telangana and is looking to acquire good diagnostic firms in eastern India to explore business opportunities there, said Sunil Chandra Kondapally, executive director at Vijaya Diagnostic in an interview with Business Insider.
Vijaya Diagnostic, which is to launch its initial public offering (IPO) on Wednesday, is looking to acquire more diagnostics firms in eastern India to expand its business.

The company has a strong presence in southern India in the states of Andhra Pradesh and Telangana and now looks to expand in some eastern states primarily through acquisition.

The company offers a “one-stop solution” for pathology and radiology testing services through its 80 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana and Andhra Pradesh and in the National Capital Region and Kolkata.

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“We are a debt free company and due to our strong margin we also have liquidity on the balance sheet. We have built up a ₹250 crore cash on the book so priority is to use that corpus for the growth of the business. So we are definitely open for acquisition opportunities in any markets of interest,” said Sunil Chandra Kondapally, executive director at Vijaya Diagnostics in an interview with Business Insider.

The diagnostics company’s business model is different from that of similar listed diagnostics companies -- Metropolis Lab, Dr Lal PathLabs.

“Right from inception our focus has been to offer both radiology, pathology and imaging all under one roof so that the patient does not have to visit any other place. In that sense we are quite different as all our centres offer these services. 93% of our revenue comes from business-to-consumer (B2C) business whereas other players have more of [a] business-to-business (B2B) model,” added Kondapally.

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Further, the company is in hunt for diagnostics firms that have a similar kind of B2C business model with brand visibility.

Vijaya Diagnostic Centre’s IPO is an entire offer for sale (OFS) from existing promoters of 3.56 crore equity shares. The company’s founder Dr. S. Surendranath Reddy will sell 50.98 lakh shares, Karakoram Limited will sell up to 2.94 crore shares and Kedaara Capital will sell partial stake of up to 11.02 lakh shares.

The private equity investor and the promoter company are not exiting completely from the firm as post-issue Kedaara Capital will hold 10% stake in the company and the promoter will have 55% shareholding and remaining 35% will be available publicly for investors.

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Vijaya Diagnostic says it has a market share of 7% in its home market -- Andhra Pradesh, Telangana. Going forward, it looks to capture close to 20% of it. The market size of the business in both states is worth ₹5,100 crore, Kondapally said in the interview.

The diagnostics company’s revenue and profit have also been increasing consistently.

ParticularsFY21FY20FY19
Net profit (in ₹ crore)84.962.546.2
Revenue (in ₹ crore)388.5354.1302.9

The latest acquisition by the company in east India was listed firm Medinova Diagnostics Services in 2014, which had established centres in Kolkata. The subsidiary now contributes 3.7% (June quarter) of revenue to the company. Hence, Vijaya Diagnostic plans to add more centres in that region.
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Over 96% of the Vijaya Diagnostic’s revenue comes from Hyderabad, the rest of Telangana, and the Andhra Pradesh region.

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