The initial public offer (IPO) of Vijaya Diagnostics, a Hyderabad-based diagnostic centre, will open for subscription today. The IPO has been fixed within the price band of Rs 522-531.

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The issue is entirely an offer for sale of 3,56,88,064 shares by the promoter Dr S Surendranath Reddy and investors Kedaara Capital AIF and Karakoram Capital AIF.

The company has reserved around 50 percent of the shares for qualified institutional buyers (QIBs). Some 15 percent of the shares are reserved for non-institutional buyers and 35 percent for retail investors. Of the total issue, it has reserved 1.5 lakh equity shares for its employees.

Vijaya Diagnostic Centre is the largest integrated diagnostic chain in southern India by operating revenue and offers a one-stop solution for pathology and radiology testing services.

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Most brokerages have recommended a 'subscribe' rating to the issue on the back of its growth potential and strong technical capabilities of the company.

IIFL Securities

At the upper price band, Vijaya is demanding a PE multiple of ~64.3 times of the FY21 earnings. It is lower than the industry average of 90.8 times, IIFL Securities said.

"Considering the future growth potential of the healthcare industry, revenue from the operation, EBITDA and PAT growth of 13.5 percent, 23.9 percent, and 35.5 percent CAGR during FY19-21, respectively; strong ROE and ROCE of 23.64 percent and 42 percent, respectively in FY21; a debt-free company with plans for acquisition and expansions, diversified services offerings and strong technical capabilities of the company, we recommend 'subscribe' to the issue with a long-term perspective," it said.

Religare Broking

Religare Broking has a positive view on the IPO on the backs of its strong presence in Southern India. Further, it is an integrated diagnostics provider that offers a one-stop solution to its customers at an affordable price, it said. The financial performance has been healthy with sales and PAT CAGR of 13.5 percent and 35.5 percent over FY19-21.

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Reliance Securities

The brokerage recommends a 'subscribe' to the IPO from a long-term perspective. It says the IPO is valued at 64x of FY21 earnings, which appears to be at a discount of 15-40 percent compared to the valuation of its peers like Metropolis and Dr Lal PathLab. However, it said, considering its annualised earnings for FY22E, it is priced at 41x, which looks reasonable.

"We further believe the lukewarm performance to the Krsnaa Diagnostics post listing (it was valued at 16x of FY21 earnings), the investors should not expect strong any substantial listing gain. However, steady cash generation, superior balance sheet, decent return ratio and healthy outlook for the healthcare industry in the country augur well for the company," it said.

Arihant Capital

The brokerage suggests subscribing to the IPO for listing gains. "We like the company as it is the largest and fastest-growing diagnostic chain with a dominant position in South India, well-positioned to leverage the high growth in Indian Diagnostics Industry," it said.

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