Shares of MedPlus Health Services, the country's second largest pharmacy retailer, listed on the stock market on Thursday with a good premium of 31 per cent. The company's shares opened at Rs 1,040 on BSE, which is higher than its issue price of Rs 796 per share.
Medplus Health IPO: Shares listed at 31% premium, know what investors should do now?
MedPlus Health's initial public offering (IPO) received a good response from investors and the issue, which opened between December 13 and 15, was subscribed 53 times. The portion set aside for Qualified Institutional Buyers (QIBs) was booked 112 times. On the other hand, non-institutional investors (NIIs) had subscribed 85 times to the issue.
The portion set aside for retail investors and employees received 5.23 times and 3.05 times bids, respectively.
MedPlus Health has raised Rs 1,398 crore through its public issue. This includes a fresh issue of Rs 600 crore, which will be used to meet the working capital requirements of its subsidiary Optival Health Solutions. At 11:43 am, the stock was trading 38 per cent higher at Rs 1,100 on BSE.
Now the question here becomes that after listing should investors exit after booking profits or should they remain in the stock? Know what analysts are saying?
Rajnath Yadav, Research Analyst, Choice Broking said, “We had given a “Subscribe” rating for this issue. The company operates in the organized pharmacy retail market in India. In FY21, the penetration of the formed pharmacy retail market across the country is close to Estimated to be 11%, which is much less than the penetration of retail pharmacy market in developed countries and China, it can be said that the organized pharmacy market of the country has immense potential for growth and is the second largest in the country. As a major pharmacy retailer, MedPlus is expected to benefit from market expansion."
"After a strong listing, we advise short term investors to exit while long term investors can hold the stock," he added.
Ajit Mishra, Vice-President (Research), Religare Broking said, “The listing has been good and long term investors can hold on to the stock. However, investors should wait for fresh buys. Due to the current volatility in the market Meanwhile, we may see a slight decline in this stock in the coming days.
Akhilesh Jat, Pharma Analyst, CapitalVia Global Research, said, “We believe that from a long-term perspective, investors should hold on to the company's strong brand name and its position as the second largest pharmacy retailer in India. However, short-term investors are good. Looking at the listing, you might consider getting out of it.
More enthusiasm shown in QIB
In three days of subscriptions during December 13-15, the IPO got subscribed 53 times in total due to good demand from investors. The share of qualified institutional buyers was subscribed 112 times, while the share of institutional investors was subscribed 85 times. Retail investors and employees also showed great interest in the issue and got 5.23 and 3.05 times subscriptions respectively.
The Rs 1,398-crore IPO consists of an offer for sale (OFS) of Rs 600 crore fresh equity shares and Rs 798 crore shares of promoter and existing shareholders. The proceeds from the new issue will be used to meet the working capital requirements of the company's subsidiary optical.
What do market experts say about future of Medplus Health share.
Given the strong demand from QIBs and affluent people, Prashant Taapsee, Vice President (Research), Mehta Equities, expects it to have a strong listing above around Rs 975, which is 22 per cent higher than the upper end of the IPO's price band. .
"However, given the company's pan India business network and its diversified range of products including pharmaceutical, wellness and FMCG, the good listing is justified," Taapsee said. “We feel that organized retail pharmacy in India is still in its nascent stage and is expected to generate good returns in the long run,” he added.
Medplus Health gray market premium.
According to IPO Watch and IPO Central, the share of MedPlus is trading at a premium of Rs 150-180 in the gray market, which is 18-22 per cent higher than the IPO price of Rs 796. However, this is lower than the gray market price on the day of the launch of the IPO, when it was trading at Rs 1,096 per share. This is mainly attributed to weakness in the secondary market.
Swapnil Shah, Head of Research, BP Wealth, said, “Looking at the gray market premium, MedPlus is expected to list at a premium. However, due to market volatility, the gray market premium has come down, which can be a buying opportunity for investors.”
Company's profit has increased rapidly
MedPlus reported a profit of Rs 63.11 crore in FY21, while it was just Rs 1.79 crore in FY20. The company's revenue has increased from Rs 2,870.6 crore to Rs 3,069.26 crore during this period.
The company is India's second largest pharmacy retailer
MedPlus was founded in the year 2006 by Gangadi Madhukar Reddy, who is the Managing Director and Chief Executive Officer of the company. MedPlus is India's second largest pharmacy retailer by revenue from operations in FY21 and number of stores as of March 2021. It offers a wide range of products including pharmaceutical and wellness products and home and personal care products such as FMCG goods. Promoters Gangadi Madhukar Reddy, AgileMed Investments and Lone Furo Investments hold 43.16 per cent stake in the company.
Growth is dependent on increasing number of sales and new stores
Speaking to reporters recently, Reddy had said that the company's growth depends on its sales and the number of stores it adds every year. He said, “Last year we added 350 stores despite Kovid and this year in the second wave of Kovid we added 350 stores in the first half despite two months of lockdown, which means we will add 700 new stores this year. " Reddy said the retail chain is also focusing on increasing sales from private label goods.
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