Krsnaa Diagnostics IPO – Issue Details, Review and Analysis [With Hidden Facts]
Krsnaa Diagnostics Limited IPO (Krsnaa Diagnostics IPO) Details
Krsnaa Diagnostics is coming up with IPO that would open for subscription on 4th August 2021. Krsnaa Diagnostics Ltd is the fastest growing diagnostic chain in India. If you look at the face of the financial information, it shows company has shown significant revenue growth in the last 3 years. It turned loss making (FY19 and FY20) in to profit generating company (FY21). Investors might get excited about such things while making investment decisions. You should read complete aspects before concluding this. Should you invest in Krsnaa Diagnostics IPO? What are the risk factors in this IPO? What is that hidden factor in the financial information where it shows abnormal revenues in FY21? Why its P&L shows profit for FY21 when it is incurring losses from its core business?
About Krsnaa Diagnostics Limited
They are the fastest growing diagnostic chain in India on multiple parameters including operating income, operating profit before depreciation.
They are large and differentiated diagnostic service provider in India. They provide a range of technology-enabled diagnostic services such as imaging (including radiology), pathology/clinical laboratory and tele-radiology services to public and private hospitals, medical colleges and community health centers pan-India.
They also operate one of India’s largest teleradiology reporting hubs in Pune that can process large volumes of X-rays, CT scans and MRI scans round the clock and 365 days a year and allows them to serve patients in remote locations where diagnostic facilities are limited. They provide quality and inclusive diagnostic services at affordable rates across various segments. Since inception, they have served more than 13 million patients. They focus on the public private partnership diagnostics segment and have the largest presence in the diagnostic PPP segment. Its PPP agreements are typically long-term in nature and ensure predictability of its revenues from operations.
In addition to the PPP segment, they have been growing its collaboration with private healthcare providers to operate diagnostic centers within their facilities and have expanded from operating 12 diagnostic centers (FY18 end) to 20 diagnostic centers (Dec-20).
Krsnaa Diagnostics IPO details
|IPO Opening Date||04-Aug-21|
|IPO Closing Date||06-Aug-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 5 per equity share|
|IPO Price band||Rs 933 to Rs 954 per equity share|
|Lot Size||15 Shares|
|Min Order Quantity||15 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Size: Rs 1,213.33 Crores
i) Fresh Issue: Rs 400 Crores
ii) OFS: Rs 813.33 Crores
What are Krsnaa Diagnostics Limited competitive strengths?
1) Company is differentiated diagnostic service provider company in India.
2) Company has comprehensive range of diagnostic services i.e., imaging, pathology, etc.
3) It has strong brand equity with quality healthcare services at affordable prices.
4) It has extensive market footprint in 13 states across India.
5) There is an employee discount of Rs 93 per share (who apply through this IPO).
What are the Objects of the Offer?
It has two objects of the offer for the IPO size of Rs 1,213.33 Crores
1) Offer for Sale (OFS) Rs 813.33 Crores: Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Fresh issue of Rs 400 Crores: Fresh issue would be used towards funding the following:
i) To finance the cost of establishing diagnostics centers at Punjab, Karnataka, Himachal Pradesh, and Maharashtra.
ii) Repayment/pre-payment of firm’s borrowings fully or partially.
iii) General corporate purposes.
Who is the promoter of Krsnaa Diagnostics Limited?
Mr. Rajendra Mutha is the promoter of the company.
How is the company financial track record?
Here are the total assets, revenue and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Profit After Tax||-580.5||-1,119.5||1,849.5|
Why to invest in Krsnaa Diagnostics IPO?
Here are the positive factors in this company.
1) Krsnaa Diagnostics Ltd is the fastest growing diagnostic chain in India.
2) Krsnaa Diagnostics has comprehensive range of diagnostic services i.e., imaging, pathology, etc. in 13 States across India.
3) Company has posted stable revenue growth in the last 3 years. Its revenues for FY19, FY20 and FY21 are at Rs 214.3 Crores, 271 Crores and 664 Crores respectively.
However, FY21 numbers are high due to valuation of “gain on fair value movement of compulsory convertible preference shares” to the tune of Rs 252 Crores. Otherwise, the FY21 revenues would have been Rs 412 Crores instead of Rs 664 Crores.
Risk Factors in Krsnaa Diagnostics IPO
1) Company has incurred losses for FY19 and FY20, however turned profit in FY21. It had incurred losses in FY19 and FY20 for Rs 58 Crores and 111.9 Crores respectively. It posted profit of Rs 184.9 Crores in FY21.
There is hidden factor in this. Company has deferred revenue tax of Rs 23.5 Crores to Rs 48.5 Crores in the last 3 years. However, in FY21, there is deferred revenue tax credit (positive) of Rs 74.8 Crores. Means if we take out this Rs 74.8 Crores deferred tax credit + abnormal gain on fair value of preference shares Rs 252 Crores (one timers), company is still in loss for FY21 too. These are one timers and company would not get them every year.
2) Substantial portion of its revenue from operations depend on payments under contracts with public health agencies. If they are unable to negotiate and retain similar fee arrangements or if the contracts are cancelled, its business can have material impact.
3) Most of the company diagnostic centers have been established and operated under PPP contracts awarded by government agencies through competitive bidding process. There can be no assurance that this would qualify for, or they will successfully compete and win such tenders.
4) Covid-19 pandemic have significant disruption and affect in results, operations and cash flows of the company.
5) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Krsnaa Diagnostics IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||11-Aug-21|
|Initiation of Refunds||12-Aug-21|
|Credit to Demat Account||13-Aug-21|
|IPO Shares Listing Date||17-Aug-21|
Is Krsnaa Diagnostics IPO Price is underpriced or overpriced?
Its IPO price band is Rs 933 to Rs 954.
1) On the upper price band of Rs 933 and EPS of Rs 71.86 for FY21, the P/E ratio works out to be 13x.
2) Since the last 3 years average EPS is negative, we cannot compute P/E.
3) There are listed peers like Dr. Lal Path Labs trading at P/E of 94x (Highest) and Metropolis Healthcare trading at P/E 77.6x (Lowest). Hence Krsnaa Diagnostics IPO share price on upper price band of Rs 954 at P/E 13x is considered as reasonably priced. However, if we exclude one timer, it is little difficult to guess whether it is underpriced of overpriced.
What is Krsnaa Diagnostics IPO GMP?
Krsnaa Diagnostics IPO GMP today is at 405 per share. GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
Krsnaa Diagnostics IPO – Review and Recommendation
Krsnaa Diagnostics Limited is one of the fastest-growing diagnostic chains in India with variety of diagnostic services.
Company generated stable revenue growth. However, for FY21 revenue growth has one timer.
Company has been incurring losses in FY19 and FY20. In FY21, there are one timers, hence it shows as profit.
I am not excited about the company financials. If we eliminate one timers, company is posting losses in the last 3 years. I would recommend investors to avoid such IPOs as of now. In future if company is generating profits, one can assess the price valuation and then invest in such companies.
I know investors would still apply for this IPO expecting some listing gains 🙂
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