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Suraksha Diagnostic Limited IPO
The last IPO that opens for subscription in November is Suraksha Diagnostic Limited (SDL), a company that offers pathology, radiology testing, and medical consultancy services.
The IPO opens for subscription on 29th November and closes on 3rd December. Let us look at the various aspects of SDL's business to help you decide whether to subscribe or invest in the IPO.
Below are the key details related to the SDL IPO:
- Issue Size: Rs 846.25 crore
- Price Band: Rs 420 - Rs 441
- Lot Size: 34 Shares
- Issue Details: Only Offer for Sale (OFS)
- Market Cap: At the upper price band, Rs 2296.76 crore
- Retail Share Offered: 35%
- Minimum Investment: Rs 14,994
Suraksha Diagnostic IPO: The Business
Suraksha offers a one-stop integrated solution for pathology and radiology testing, and medical consultation services to its customers through its extensive operational network, consisting of its flagship central reference laboratory, 8 satellite laboratories (co-located with diagnostic centers), and 215 customer touchpoints which include 49 diagnostic centers, and 166 sample collection centers (primarily franchised), as of June 30, 2024 across the states of West Bengal, Bihar, Assam, and Meghalaya.
The company offers a comprehensive range of 2,300+ tests that cover a range of specialties and disciplines. Their diagnostic test menu includes
(a) 788 routine pathology tests ranging from basic biochemistry and hematology to 664 specialized pathology tests such as advanced biochemistry, histopathology, and molecular pathology
(b) 766 basic/intermediate radiology tests ranging from basic x-rays, ultrasonography (USG), and computerized tomography (CT) scans to 119 advanced radiology tests such as magnetic resonance imaging (MRI) scans and specialized CT scans.
In addition to integrated pathology and radiology testing services, they offer omnichannel medical consultation services via online and offline modes to their customers under a single roof through 44 of their diagnostic centers which house 126 polyclinic chambers hosting 750+ doctors.
Suraksha Diagnostic IPO: Industry Overview
The healthcare industry in India grew at 10-11% CAGR between FY17 and FY24 to ~Rs 9.5-10.5 trillion. By FY28, the industry is expected to grow to Rs 14.5-15.5 trillion, at a CAGR of 10-11%, driven by factors such as an aging population, increased incidence of lifestyle diseases, growing healthcare awareness, technology adoption, and a growing affluent middle class.
Within the healthcare industry, Diagnostics formed about 10% of the industry in FY17. The diagnostic industry grew at 9-10% from FY17 to FY24 to form 9% of the 9.5-10.5 trillion Healthcare market in FY24. The growth was led by an increasing number of people undergoing preventive health check-ups, Rising disposable income, prevalence of non-communicable diseases, etc.
From FY24 to FY28, the diagnostics industry is expected to grow at 10-12% thereby outpacing the growth of the healthcare industry which is expected to grow at 10-11% CAGR during the same period.
The pathology segment, estimated to have grown steadily at a CAGR of ~8-9% over FY17 to FY24, is estimated to clock a CAGR of 9-11% over FY24 to FY28. Similarly, the radiology segment, estimated to have grown at a CAGR of ~9.5-10.5% over FY17 to FY24, is expected to rise further at a CAGR of 11-13% over FY24 to FY28, indicating robust growth potential led by technological advancements and heightened demand for diagnostic imaging across medical specialties.
Suraksha Diagnostic IPO: Listed Peers
As per the RHP, the company has four listed peers - Dr Lal PathLabs, Metropolis Healthcare, Thyrocare, and Vijaya Diagnostic. In this section, we will compare the financials of five companies to help you evaluate SDL. Here is the comparison based on FY24 numbers:
- In revenue terms, Dr Lal PathLabs has the highest topline, followed by Metropolis Healthcare. Suraksha has the lowest revenue among its peers.
- Earnings per share (EPS) is highest for Dr Lal PathLabs (Rs 43.05), followed by Metropolis (Rs 24.95) and Throcare (Rs 13.42).
- All the companies have high PE with the average PE of listed peers being 79.65.
- Return on Net Worth (RoNW) is highest for Dr Lal PathLabs (20.35%), followed by Vijaya Diagnostic (19.77%) and Suraksha Diagnostic (14.09%).
Check the table below for more details.
| Name of Company | Revenue | EPS (Rs) | P/E | RoNW (%) |
| Suraksha Diagnostic Limited | 222.26 | 4.43 | NA | 14.09% |
| Dr Lal PathLabs | 2,226.60 | 43.05 | 77.08 | 20.35% |
| Metropolis Healthcare | 1,207.71 | 24.95 | 89.61 | 12.26% |
| Thyrocare | 572.39 | 13.42 | 65.52 | 13.34% |
|
Vijaya Diagnostic |
547.81 | 11.62 | 86.4 | 19.77% |
Suraksha Diagnostic IPO: Financials
Below are the financial numbers of the company from recent years:
- Suraksha Diagnostic reported a revenue of Rs 223.19 crore, Rs 190.13 crore, and Rs 218.71 crore for FY22, FY23, and FY24, respectively. The revenue has declined in the last two financial years.
- The EBITDA for FY22, FY23, and FY24 were Rs 65.25 crore, Rs 47.48 crore, and Rs 73.62 crore, respectively. The EBITDA margins for the same period were 29.24%, 24.97%, and 33.66% respectively.
- The company has posted a net profit of Rs 20.82 crore for FY22, Rs 6.06 crore for FY23, and Rs 23.13 crore for FY24.
- For the last three financial years, the company has reported an average EPS of Rs 3.27 and an average RoNW of 11.05%.
- If we attribute annualized FY25 earnings to a post-IPO fully diluted equity base, then the asking price is at a P/E of 74.87, and based on FY24 earnings, the P/E stands at 99.32.
- Net debt/equity improved from 0.37 in Fiscal 2022 to 0.20 in Fiscal 2024, indicating reduced leverage and better financial health. The latest quarterly figure of 0.16 shows further deleveraging.
- The number of tests per patient has increased from 2.95 in FY22 to 5.26 in FY24.
| KPIs | Q1FY25 | FY24 | FY23 | FY22 |
| Revenue from Operations | 60.732 | 218.71 | 190.13 | 223.19 |
| Restated Profit | 7.667 | 23.127 | 6.065 | 20.824 |
| EBITDA | 21.721 | 73.618 | 47.479 | 65.253 |
| EBITDA Margin | 35.77 | 33.66 | 24.97 | 29.24 |
| Return on Equity | NA | 14.09 | 4.32 | 15.38 |
| Return on Capital Employed | NA | 21.46 | 9.05 | 23.11 |
| Net Debt/Equity | 0.16 | 0.2 | 0.27 | 0.37 |
Suraksha Diagnostic IPO: Competitive Strengths
Below are some of the competitive strengths of the company:
- Diagnostic chains within eastern India are well positioned to leverage growth opportunities for organized diagnostic chains in the diagnostic services markets in eastern and northeastern India.
- Track record of profitability and financial performance.
- Integrated diagnostics provider with one-stop solution offering pathology and radiology testing, and medical consultation services.
- Technologically advanced clinical infrastructure and trained personnel providing diagnostic services.
Suraksha Diagnostic IPO: Growth Potential
Below are some growth plans of the company:
- They plan to strengthen their position in core geography i.e. Kolkata and the rest of West Bengal.
- The company plans to expand beyond its core markets in adjacent geographies of eastern and north-eastern India.
- They plan to supplement organic growth with selective acquisitions.
Suraksha Diagnostic IPO: Risks
Below are some risks associated with their business:
- 95.48% of their revenue in Fiscal 2024 was generated from West Bengal, and any loss of business in such region could have an adverse effect on the business.
- The diagnostics industry in India is highly competitive and their inability to compete effectively with other healthcare service providers may adversely affect their business, results of operations, and financial condition.
- The B2B segment contributed to 6.17% of their revenue in Fiscal 2024 and any non-renewal or cancellation of their arrangements with their institutional customers, including hospitals, and Public-Private Partnership (“PPP”) contracts may adversely affect the financials.
