What you must know about Clinitech Laboratory IPO: Price Band ₹96 per share

About Clinitech Laboratory Ltd

Clinitech Laboratory Ltd was incorporated in the year 1990 and is engaged in providing diagnostic and health testing and services for the last 34 years. The company currently offers more than 150 different health-related tests across its centres. The broad range of tests offered by Clinitech Laboratory Ltd  include biochemical tests, immunology tests, haematology tests, molecular biology tests, serology tests, microbiology tests and histopathology tests. The company operates through its network of 8 diagnostic centres located at Thane and Navi Mumbai; districts on the outskirts of Mumbai. Clinitech Laboratory Ltd conducts more than 3 lakh tests on an annual basis and all its existing testing centres are NABL (National Accreditation Board for Testing and Calibration Laboratories) accredited laboratories. They are equipped with modern technology and high quality equipment adhering to the highest standards of safety and quality. The company employs 85 personnel on its rolls across various departments.

Highlights of the Clinitech Laboratory IPO

Here are some of the highlights of the Clinitech Laboratory IPO on the SME segment of the Bombay Stock Exchange (BSE). 

•    The issue opens for subscription on 25th July 2024 and closes for subscription on 29th July 2024; both days inclusive.

•    The stock of Clinitech Laboratory IPO has a face value of ₹10 per share and it is a fixed price issue. The fixed price for the IPO has been set at ₹96 per share. Being a fixed price IPO, there is no question of price discovery.

•    Clinitech Laboratory IPO has only a fresh issue component and no offer for sale (OFS) component in the public issue. While the fresh issue portion is EPS dilutive and equity dilutive, OFS is just a transfer of ownership and  hence it is neither EPS dilutive nor is it equity dilutive.

•    As part of the fresh issue portion of the IPO, Clinitech Laboratory Ltd will issue a total of 6,02,400 shares (6.024 lakh shares), which at the upper band IPO price of ₹96 per share aggregates to fresh fund raising of ₹5.78 crore.

•    Since there is no offer for sale, the fresh issue of shares will also double up as the total issue size. As a result, the overall IPO size will also comprise of the issue of a total of 6,02,400 shares (6.024 lakh shares) which at the upper band of the IPO price at ₹96 per share will aggregate to overall IPO size of ₹5.78 crore.

•    Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 31,200 shares. SVCM Securities Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.

•    The company has been promoted by Jagdish Umakant Nayak, Jyoti Jagdish Nayak, and Ashutosh Jagdish Nayak. The promoter holding in the company currently stands at 83.63%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 61.56%.

•    The fresh issue funds will be used by the company towards proposed expansion of its diagnostic testing centres across India. Part of the funds will also be used for general corporate purposes. 

•    Inventure Merchant Banker Services Private Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is SVCM Securities Private Ltd. The IPO of Clinitech Laboratory Ltd will be listed on the SME IPO segment of the BSE.
 

Clinitech Laboratory IPO – Key Dates

Here are the key dates about the IPO.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on July 31st 2024, will be visible to investors under the ISIN Code – (INE0QMR01015). This credit to the demat account is only applicable to the extent of the allocation of shares and if no allocations are made in the IPO, then no credit would be visible in the demat account.

IPO Allocation and Minimum Investment Lot Size

Clinitech Laboratory Ltd has already announced the market maker allocation at 31,200 shares as inventory for market making. SVCM Securities Private Ltd will be the market maker for the IPO. The breakdown of the overall IPO of Clinitech Laboratory Ltd in terms of allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,200 shares. Thus, retail investors can invest a minimum of ₹1,15,200 (1,200 x ₹96 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,400 shares and having a minimum lot value of ₹2,30,400. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

There is no maximum size limit for HNI applicants in an SME IPO. Let us now turn to the financial highlights of the IPO of Clinitech Laboratory Ltd. The company has reported numbers up to the close of fiscal year FY24 (Year ended March 2024); which is the latest year for which data is available.

Financial Highlights: Clinitech Laboratory Ltd

The table below captures the key financials of Clinitech Laboratory Ltd for the last 3 completed financial years. 

Data Source: Company DRHP filed with SEBI

The company has almost had stagnant sales growth in the last 3 years while profits in the latest year are down. The EPS of ₹2.21 for FY24, on a pre-IPO basis translates into a valuation-based P/E ratio of 43-44X on the IPO price of ₹96 per share. The P/E ratio would actually be higher at 58-59X, we consider the diluted EPS post the IPO. That does not give too much comfort on valuations. Diagnostic laboratories are a fast growing business but it is a business of scale. With a small set-up the company may find the going tough and the outcome is visible in the profit numbers. Investors are advised to be cautious on this IPO, especially considering that the risks appear to outweigh the upside potential!