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Medplus Health Services Limited was incorporated in November 2006 by Gangadi Madhukar Reddy with other promoters. Medplus is the second largest pharmacy retailer in India, in terms of the number of stores as of March 31, 2021, and in terms of revenue from the operation. Medplus offers a wide range of pharmaceutical products and fast-moving consumer goods (FMGC), such as medicines, vitamins, medical devices, home, and personal care products, etc.

Positives (a) Medplus is the second largest pharmacy retailer in India, in terms of the number of stores as of March 31, 2021, and in terms of revenue from the operation. (b) Adding value proposition to the customer in terms of 2-hour delivery, competitive pricing and a wide range of Pharmaceutical and FMCG products. (c) Medplus is the first pharmacy retailer in India to offer an omnichannel platform i.e. customers can visit the stores or place the order online by mobile application or website. (d) Strong execution track record of stores expansion, from 48 stores in 2006 to more than 2300 stores in 2021.

Investment concerns: (a) Increase in competition, from offline as well as online companies like Apollo Pharmacy, Tata 1mg, Netmeds etc. (b) The company has got some benefit of Covid related revenue in 2021 and in H1FY2022, once Covid revenue normalizes it may be difficult for the company to have double-digit revenue growth. (c) Company may face certain challenges to expand its retail chain in other geographies.

Outlook & Valuation: Based on H1FY2022 numbers, the IPO is priced at a EV/EBITDA of 27.5 times and price to sales at 2.5 times at the upper price band of the IPO. Medplus is the second largest pharmacy retailer in India, company offer a good value proposition to its customer in terms of discount, wide range of product and fast delivery. We believe that the company omnichannel platform will help to deliver strong growth in future. Hence, we are assigning a “SUBSCRIBE” recommendation to the Medplus Health Services Limited IPO.

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