Suraksha Diagnostic IPO opens today: Is it worth investing? Analysts weigh

The company's unlisted shares were trading flat in the grey market ahead of the subscription opening. As a result, the grey market premium (GMP) for the Suraksha Diagnostic IPO remains nil on Friday

Suraksha Diagnostic IPO: The initial public offering (IPO) of healthcare services provider Suraksha Diagnostic opens for public subscription today, November 29, 2024. The company has announced that it has already raised Rs 253.87 crore from anchor investors through bidding concluded on November 28, 2024. The Suraksha Diagnostic IPO is a book-built issue of Rs 846.25 crore, comprising an entire offer for sale (OFS) of 19,189,330 shares with a face value of Rs 10 apiece.

 

The IPO is available at a price band of Rs 420-441 per share, with a lot size of 34 shares. Accordingly, investors can bid for a minimum of 34 shares and in multiples thereof. A retail investor can bid for a maximum of 13 lots (442 shares), requiring an investment of Rs 1,94,922.

 

 

Meanwhile, the company's unlisted shares were trading flat in the grey market ahead of the subscription opening, as revealed by sources tracking unofficial markets. Thus, the grey market premium (GMP) for the Suraksha Diagnostic IPO remains nil as of Friday, November 29, 2024.

 

The subscription window will conclude on Tuesday, December 3, 2024. Following this, the basis of share allotment is likely to be finalised on Wednesday, December 4, 2024. Successful allottees will receive the shares in their demat accounts on Thursday, December 5, 2024.

 

Suraksha Diagnostic shares are expected to debut on the stock market on Friday, December 6, 2024, listing on both BSE and NSE.

 

KFin Technologies is the registrar for the Suraksha Diagnostic IPO, while ICICI Securities, Nuvama Wealth Management, and SBI Capital Markets are the book-running lead managers. 

 

Should you Subscribe to Suraksha Diagnostic IPO?

 

Deven Choksey Research – Avoid

Analysts at Deven Choksey Research have assigned an ‘Avoid’ rating to the IPO, citing higher valuations compared to peer companies. While the diagnostic segment in eastern India, where Suraksha Diagnostic primarily operates, offers significant growth potential, the increasing presence of organised competitors poses substantial challenges.

 

“Intense competition may hinder Suraksha’s growth prospects,” noted the analysts in a research report. Additionally, competitors demonstrate higher operational efficiency, with an average ROCE of 42.6 per cent compared to Suraksha's 21 per cent, indicating better capital utilisation by peers.

 

“Suraksha is valued at a P/E ratio of 99.3x on FY24 EPS, significantly higher than its peers like Dr Lal PathLabs (63.2x) and Metropolis Healthcare (75x). Its regional focus and smaller scale, combined with stretched valuations, lead us to assign an ‘Avoid’ rating,” the report stated.

 

Swastika Investmart – Avoid

Swastika Investmart has also recommended an ‘Avoid’ rating. The brokerage highlighted the company's inconsistent financial performance, including a setback in FY23, despite signs of recovery recently. “Valuations appear aggressively high. Investors may find better opportunities in other listed players,” the brokerage noted.

 

Anand Rathi Research – Avoid

Anand Rathi Research echoed similar sentiments, assigning an ‘Avoid’ rating to the IPO. The brokerage noted, “At the upper price band, the company is valued at 99.3x its FY24 earnings and 75.0x its annualised FY25 earnings.”

 

Following the issuance of equity shares, the company’s market capitalisation stands at Rs 2,296.76 crore, with a market cap-to-sales ratio of 10.5x based on FY24 earnings.

 

“The company’s operations are limited to eastern India, restricting market scope. We believe the issue is richly priced and recommend an ‘Avoid’ rating,” the brokerage concluded. 

Suraksha Diagnostic offers a one-stop integrated solution for pathology and radiology testing, and medical consultation services to their customers through the extensive operational network, consisting  of their flagship central reference laboratory, 8 satellite laboratories (co-located with their diagnostic centres) and 215 customer touchpoints which include 49 diagnostic centres, and 166 sample collection centres (primarily franchised), as of June 30, 2024 across the states of West Bengal, Bihar, Assam, and Meghalaya.