Airox Technologies, a medical equipment company, has decided to cancel its 750 crores initial public offering (IPO). IPO organizers Sanjay Bharatkumar Jaiswal and Ashima Sanjay Jaiswal intended it to be an offering to sell (OFS) of shares. The Securities and Exchange Board of India has received the Company’s preliminary filing for the proposed IPO on September 30, 2022. (Sebi).
Still, the draft offering documents for the IPO on Feb. 28 were withdrawn for unknown reasons, according to an update from the market regulator. As of fiscal 2022, the Aurangabad-based company is a pressure swing adsorption (PSA) oxygen generator manufacturer with a 50-55 percent market share in the privately owned medical hospital PSA oxygen market.
With around 872 PSA (Pressure Swing Adsorption) oxygen generators installed and working as of March 2022, the Company is promoting the spread of on-premise PSA (Pressure Swing Adsorption) oxygen generators in Indian hospitals.
PSA oxygen generators are devices that produce pure oxygen by removing nitrogen gas from the air using adsorbents. These devices provide a consistent supply of oxygen at a lower cost than other typical medical oxygen procurement techniques.
So many healthcare companies are going public, and many more are on the way.
According to the PRIME database, which analyzes the major Indian capital markets, at least 13 IPOs have been launched in these areas over the past two years. This is a huge increase compared to previous years. The number of IPOs has increased over the past two years.
“There has been an average of three IPOs a year for the last five years, but seven IPOs a year for the last two years, which is a very strong number,” says Pranav Haldea, Managing Director of PRIME Database Group. Global Health, which owns Medanta Hospital in Gurugram, had its last IPO in November 2022. The IPO involved a new issue of shares worth up to Rs 500 crore and an offer to sell up to Rs 500 crore in shares.
According to Haldea, the pipeline of IPOs in healthcare, pharmaceuticals and diagnostics appears to be solid. According to the PRIME database, at least eight companies in the industry have already received approval from the market regulator Securities and Exchange Board of India (Sebi) to raise about Rs 18,000 through initial public offerings (IPOs) and will launch their IPOs shortly.
The companies involved include GPT Healthcare, Wellness Forever Medicare, API Holdings, Kids Clinic India, Macleods Pharmaceuticals, Yatharth Hospitals & Trauma Care Services and Concord Biotech. In addition, Mankind Pharma, Infinion BioPharma, Innova Capital, Healthvista India and Blue Jet Healthcare have submitted draft Red Herring Prospects (DRHPs) to Sebi for IPOs and are seeking approvals.
The PRIME database estimates these companies could raise an additional Rs 9,700 crore. New Delhi-based pharmaceutical company Mankind Pharma expects to raise over Rs 5,500 crore on its initial public offering (IPO), making it one of the largest in the country. Aditya Sood, Fund Manager at InCred Multicap Portfolio, says: “We like companies that focus on manufacturing active pharmaceutical ingredients (APIs), which are the biologically active component of a drug, and that have proven they can both reduce costs Executives or have strong R&D capabilities. Several successful companies meet this requirement.
Not surprisingly, more people are preparing to participate. For example, Emcure Pharma, VLCC Healthcare and Skanray Technologies have announced plans to issue IPOs valued at Rs 4,500 crore, Rs 300 crore and Rs 400 crore respectively. According to the PRIME database, Vijaya Diagnostics was listed on the BSE on September 14, 2021, and online pharmacy PharmEasy is also considering an IPO.
Then Biocon subsidiary Biocon Biologics said it would consider an IPO in the next 12 to 24 months, with the exact date being determined by market conditions. In November 2022, the company acquired the global biosimilars business (drugs that are similar to their branded reference medicines) from longtime partner Viatris after receiving approximately $330 million in January from private equity investors True North, Tata Capital, Goldman Sachs and ADQ had raised 2021.
Although the 13 IPOs since November 2020 have raised over Rs 9,000 crore in the primary market, investors have had mixed results so far. According to data from the PRIME database, the Krishna Institute of Medical Sciences, Sigachi Industries, Ami Organics, Rainbow Children’s Medicare and Global Health have increased their asking prices by 35% to 78% as of February 8, 2023. Tatva Chintan Pharma Chem Ltd. , a specialty chemicals manufacturer based in Gujarat, has been the main beneficiary. It debuted on the stock exchange on July 29, 2021 and its share price has risen by over 85 percent from the issue price of Rs.1,083 to Rs.1,998.55 on February 8.
On the other hand, Krsnaa Diagnostics, which made its market debut on Aug. 16, 2021, has fallen by 53% to Rs. 445 on Feb. 8 from its issue price of Rs. 954. Windlas Biotech, Glenmark Life Sciences, Medplus Health Services, Vijaya Diagnostics Center, and Supriya Life-Sciences are all down between 18% and 48% since their initial public offering (February 8, 2023).
IPOs in the cooking oil, insurance, and hospital and healthcare services sectors accounted for 56% of total issuance in the primary market in FY22 (to mid-December), according to a study conducted by ACE Equity and the Bank of Baroda. According to Sonal Badhan, an economist in the Bank of Baroda’s economic research department, “returns in the healthcare services sector have been modest at best, although the cooking oil business has performed reasonably well in the stock market. However, the insurance industry has taken a hit.
Let’s take a closer look at some of the companies going public. Revenue of Tatva Chintan Pharma Chem rose to Rs.120.6 crore in the third quarter of FY23 from Rs Production capacity at its current factory in Dahej Special Economic Zone in Gujarat.
The company is also expanding its R&D center in Vadodara, which is expected to be completed by the end of FY23, according to a regulatory filing. The Company has completed plant-scale trials of a novel product using continuous-flow chemistry (a type of chemical reaction) that is expected to be commercialized by 2024.
Ami Organics, a newcomer to the stock exchange, reported a 7.9 per cent increase in consolidated revenue to Rs.152.4 crore in the third quarter of FY23 versus Rs.141.2 crore in the third quarter of FY22 Advanced Pharma Intermediates sector drove performance, while specialty chemicals business was flat in terms of growth.
Medanta, or Global Health, has had the greatest success. Medanta, developed by renowned cardiologist Dr. Naresh Trehan is recognized as one of the best private hospitals in North India, specializing in cardiology and heart science, neurology and cancer. “We project a 17% compound annual growth rate in revenue in FY22-25E, driven by the ramp-up of hospitals in Lucknow and Patna and continued growth of older facilities,” the Jefferies Group stated in a November 2022 research report.
In FY22, the group’s original hospitals in Gurugram, Indore and Ranchi accounted for 81 percent of its revenue and 77 percent of its total bed capacity. According to the Jefferies report, Medinta should be protected from any bad political decisions that the Delhi/ could harm NCR FY25).
Meanwhile, Glenmark Life Sciences reported sales increasing to Rs.540.7 crore in Q3FY23 from Rs.522.5 crore in Q3FY22. According to Anand Rathi Research, the company is able to sustain profits despite the challenges in the industry. “With investments ramping up, product portfolio diversification and increased regional footprint, we expect Glenmark Life Sciences to do better,” Anand Rathi said in a report.
Vijaya Diagnostics’ non-Covid-19 sales increased 15.1 percent year-on-year and 15.9 percent sequentially in the second quarter of fiscal 23. Revenue for COVID-19 fell 67.6 percent year-on-year.
“We remain bullish on the stock given the company’s B2C focus (95% of revenue in Q2 FY23), highest margin in the industry, and continued focus on deeper development in its leading regions,” Vinay said Bafna, Research Analyst at ICICI Securities. The diagnostics sector remained busy last year due to COVID-19 and is expected to continue as demand for communicable disease testing and preventative health testing increases.
Will the industry’s upcoming IPOs keep investors interested?
In a country like India, where better insurance coverage, greater affordability and new supplies have contributed to more visible medium-term demand, the healthcare and pharmaceutical industries have performed well and have excellent visibility for top-line and earnings growth. Deepak Jasani, Head of Retail Research at HDFC Securities, explains that their values are unaffected by Nifty’s comparatively high price-to-earnings ratio as these sectors are conservative.
In addition, many unlisted companies have financing from private equity or venture capitalists who want to exit (at least partially) after two to four years. Investor appetite for IPOs remains robust as the likelihood of generating significant negative returns from these IPOs is low (unlike New Age IT companies).
According to CRISIL Research, India’s healthcare business would grow at a robust 13-15 percent CAGR between fiscal years 2022 and 2026. Increasing government investment in healthcare is also a factor – the federal government’s allocation to the Department of Health and Family Welfare grew at a promising 11% CAGR between FY11 and FY23, although the healthcare budget to GDP ratio remains relatively low at 1.98% .
edited and proofread by Nikita Sharma
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