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Below is quote on Krsnaa Diagnostics Limited IPO by Mr. Yash Gupta, Equity Research Associate, Angel Broking Ltd   

Krsnaa Diagnostics Limited was incorporated on 22nd December 2010 at Pune. Krsnaa is a large and differentiated diagnostic service provider. They provide a range of technology-enabled diagnostic services such as imaging (including radiology), pathology/clinical laboratory, and tele-radiology services to public and

private hospitals, medical colleges and community health centres panIndia. Krsnaa focuses on the public private partnership (“PPP”) diagnostics segment and have the largest presence in the diagnostic PPP segment.

Positives: (a) Company has the largest presence in the diagnostic PPP segment, PPP agreements are typically long term in nature and ensure predictability of revenue. b.Company continues to become preferred partner from public health agencies, company granted 77% of all tenders they have bid. c. Companies diagnostic centres span 13 states and present in over 1800 locations.

Investment concerns: (a) 67% of revenue comes from Public health agencies, any change in regulations can impact companies' revenue. b) Weak financials, company has a negative net worth of 197 crores in 2020, due to that company need to raise fresh capital in 2021. c) Low promoter shareholding, promoter holds 29.5% of pre issue and it will come down to 25.5% after the IPO.

Outlook & Valuation: Based on FY-2021 earnings, IPO is priced at PE of 77.9x and EV/EBITDA of 29.5x at the upper band of the IPO price, we believe short term positives have been priced in at the IPO price. Company having weak balance sheet and even in FY-2020 company has negative net worth. If we adjust the exceptional gain of 252 crores then the company has reported a net loss for FY2021. Looking at the valuations and weak balance sheet, we are assigning a “NEUTRAL” recommendation to the issue.

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