August was a truly exciting month with NIFTY crossing 17,000! Eight companies across various sectors launched their initial public offerings (IPOs) as well. Now, Vijaya Diagnostic Centre will kick off the IPO frenzy of September 2021. They have opened a three-day IPO today— Sept 1. It will be the second diagnostics company after Krsnaa Diagnostics Ltd to go public this year. In this article, we will dive into the business model of the company and learn more about its IPO.

Company Profile – Vijaya Diagnostic Centre Limited

Established in 1981, Vijaya Diagnostic Centre Ltd (VDCL) offers a one-stop solution for pathology and radiology testing services through an extensive network. It operates 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in Telangana, Andhra Pradesh, the National Capital Region (NCR), and Kolkata (as of June 30, 2021). The centres contain cutting-edge diagnostic testing capabilities and robust IT infrastructure.

VDCL offers a comprehensive range of 1,610 pathology tests, divided into 740 routine and 870 specialised tests. It also offers 220 basic and 320 advanced radiology tests that cover a wide range of specialities and disciplines. The test menu includes X-rays, ultrasounds, computerised tomography (CT) scans, echocardiograms, MRI scans, and other advanced tests. They have designed preventive and wellness packages to monitor and treat health conditions.

The company follows a customer-centric approach to enhance the overall quality of its services. VDCL provides value-added services such as the collection of specimens from customers’ houses, as well as the delivery of test reports. Its individual consumer business contributed ~92% of the total revenue from operations in FY21. The company has implemented a “hub and spoke” model, in which specimens are collected across multiple locations within a catchment area for delivery to reference laboratories for diagnostic testing. This helps them provide greater economies of scale and consistency in testing procedures and results.

As of March 31, 2021 (FY21), all Vijaya Diagnostic Centre laboratories hold National Accreditation Board for Testing and Calibration Laboratories (NABL) accreditations. Moreover, three diagnostic centres hold Patient Safety & Quality of Care accreditations.  Currently, VDCL is the largest integrated diagnostic chain in Southern India in terms of operating revenue

About the IPO

Vijaya Diagnostic Centre’s public issue opens on September 1 and closes on September 3. The company has fixed Rs 522-531 per share as the price band for the IPO

The offer for sale (OFS) of up to 3.56 crore equity shares from existing shareholders aggregates to Rs 1,895.04 crore. Individual investors can bid for a minimum of 28 equity shares (1 lot) and in multiples of 28 shares thereafter. You will need a minimum of Rs 14,868 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 364 equity shares (13 lots).

The main objective of the IPO is to provide an exit strategy (or liquidity) to VDCL’s shareholders and early investors. Thus, VDCL is not raising any funds through the public issue. It aims to achieve the benefits of listing the equity shares on NSE and BSE. The total promoter holding in the company will decline from 59.78% to 54.68% post the IPO.

Financial Performance

The company has posted a consistent increase in revenues and profit over the last three financial years. Between FY17 and FY20, operating income grew at a CAGR of 15%. The Return on Net Worth (RoNW) stands at 23.6%, which is at par with that of its peers Dr Lal PathLabs and Metropolis Healthcare. RoNW signifies how well the company uses shareholders’ capital (or equity) to generate profits. Moreover, VDCL is a debt-free company.

Risk Factors

  • Since Vijaya Diagnostic Centre derives most of its revenue from walk-in customers, its brand and reputation are crucial for the success of its business. The company’s business and prospects may be adversely affected if it is unable to grow its brand name and brand image. 
  • The ongoing impact and uncertainty surrounding the Covid-19 pandemic could severely impact its overall financial performance.
  • Any interruptions at VDCL’s flagship centre and other diagnostic centres may affect their ability to process diagnostic tests. This could negatively impact its business operations.
  • The company’s CEO, Sura Suprita Reddy, and other officials were named in a criminal proceeding. The State alleged that they had committed offences under various sections of the Indian Penal Code due to an accident resulting in a fire at Park Hospital in Hyderabad.
  • VDCL’s operations are primarily concentrated in South India. The loss of business in the region could harm financial performance and cash flows.
  • The company relies on third parties to provide testing equipment and reagents. The failure to obtain testing equipment or recall of such gears could adversely impact its overall operations.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Edelweiss Financial Services, ICICI Securities, and Kotak Mahindra Capital. Vijaya Diagnostic Centre Ltd had filed the Red Herring Prospectus (RHP) for its IPO on August 24, 2021. You can read it here.

Ahead of the IPO, the company was able to raise Rs 566.12 crore from anchor investors. The marquee investors include Fidelity Investment Trust, Abu Dhabi Investment Authority (ADIA), CLSA, Franklin Templeton MF, Bajaj Allianz Life Insurance, SBI Life Insurance, etc.


As per a report from CRISIL, the Indian diagnostics market was valued at Rs 71,000-73,000 crore in the previous financial year (FY21). It is projected to grow at a CAGR of 12-13% to Rs 92,000-98,000 crore by FY23. The rise in health awareness and disposable income, an increase in demand for better healthcare facilities, and an increase in spending for preventive healthcare will drive the expansion of this market. Vijaya Diagnostic Centre is well-positioned to leverage the growth in this segment with its extensive operational capabilities. The strength of its brand, high quality of diagnostic services, value-added services, and affordable offerings has helped VDCL retain its customers. 

VDCL will be directly competing with companies such as Dr Lal PathLabs, Metropolis Healthcare, and recently listed Krsnaa Diagnostics. It has become quite a competitive space over the past year, especially due to the Covid-19 pandemic. With cases rising again, states must focus on rampant testing.

Before applying for the IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Unfortunately, recently concluded IPOs failed to provide listing gains as expected, even when the markets rallied so much. As always, consider the risks associated with VDCL and come to your own conclusion.

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.