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Chandan Healthcare

• Chandan Healthcare is coming out with an initial public offering (IPO) of 67,52,000 equity shares in a price band Rs 151-159 per equity share.
• The issue will open on February 10, 2025 and will close on February 12, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 15.10 times of its face value on the lower side and 15.90 times on the higher side.
• Book running lead manager to the issue is Unistone Capital.
• Compliance Officer for the issue is Rajeev Nain. 

Profile of the company

Chandan Healthcare runs a diagnostic network in North India with pathology and radiology testing services. As of December 31, 2024, it has one flagship laboratory, nine central laboratories, twenty-seven satellite centres, more than three hundred collection centres and located in Jaipur and across Uttar Pradesh and Uttarakhand, with facilities in more than 23 cities and towns across Uttar Pradesh and more than 19 cities and towns in Uttarakhand. Out of its various laboratories, eight are National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited while three of its diagnostic centres have National Accreditation Board for Hospitals & Healthcare Providers (NABH) accreditation. In Fiscal 2025, till December 2024 it carried out around 55.79 lakhs tests on about 17.11 lakh patients’ where it derived about 70.04% of the revenue from its operations in regions of Uttar Pradesh.

As of December 31, 2024, the company provided a wide range of 1,496 tests across different specialties. Its test menu includes (a) 481 routine pathology tests, covering basic biochemistry and hematology, as well as 1,015 specialized pathology tests, such as immohistopathology, and molecular pathology, and (b) 545 radiology tests, including basic x-rays, ultrasonography (USG), computed tomography (CT), magnetic resonance imaging (MRI), and specialized CT scans. Its radiology facilities have eleven CT scanners and four MRI machines. For the period ended December 2024, its sale of products accounted for 47.00% of its total revenue, pathology services made up 34.22% of its total revenue, while radiology services accounted for 18.77% of its total revenue.

The company has adopted a clusters and collection points model i.e. grouping of nearby patients or laboratories or clinics into clusters and collecting samples at those designated points, then transporting them in bulk to a central laboratory for processing, this enhances its economies of scale, ensures greater consistency in testing procedures, and boosts its brand presence by reaching more customers in remote areas. Samples are collected from various locations within a cluster and transported to its laboratories for diagnostic testing. Each diagnostic centres provides integrated diagnostics services (pathology and radiology tests under one roof) with small and medium centres offering pathology tests and basic and intermediate radiology tests, and large centres offering pathology tests, basic and advanced radiology tests.

Proceed is being used for:

• Setting up of a new flagship diagnostic centre in Jankipuram, Lucknow, Uttar Pradesh
• Setting up of a new central reference laboratory at Ayodhya, Uttar Pradesh
• Setting up of a new central reference laboratory at Ashiyana, Lucknow, Uttar Pradesh
• General corporate purposes

Industry Overview 

The hospital industry in India, accounting for 80% of the total healthcare market, is witnessing a huge investor demand from both global as well as domestic investors. India ranks 10th in Medical Tourism Index (MTI) for 2020-2021 out of 46 destinations of the world. Foreign Tourists Arrival on medical purpose increases from 1.83 Lakh in 2020 to 5.04 Lakh in 2023 (Jan-Oct). The diagnostics industry in India is currently valued at $ 4 Billion. The share of the organized sector is almost 25% in this segment (15% in labs and 10% in radiology). 1,56,000 Ayushman Bharat centers, which aim at providing primary health care services to communities closer to their homes, are operational in India. which shows that health services are being saturated, including by use of digital tools. India climbed to the 63rd rank among 190 countries in the World Bank’s ‘Ease of Doing Business’ rankings in 2020. The World Bank’s Logistics Performance Index (LPI) 2023 has ranked India at 38th position (out of 139 economies), recording an improvement of 6 positions. As of 2024, the Indian healthcare sector is one of India’s largest employers as it employs a total of 7.5 million people. Progress in telemedicine, virtual assistants, and data analytics is expected to create 2.7-3.5 million new tech jobs.

The Government of India’s 2024-25 interim budget proposes expanding medical colleges using existing hospitals, building a stronger foundation for future healthcare professionals. The number of allopathic doctors, with recognised medical qualifications, registered with state medical councils/national medical councils increased to 1.3 million in June 2022, from 0.83 million in 2010. As per information provided to the Lok Sabha by the Minister of Health & Family Welfare, Dr. Bharati Pravin Pawar, the doctor population ratio in the country is 1:834, assuming 80% availability of 12.68 lakh registered allopathic doctors and 5.65 lakh AYUSH doctors. Healthcare innovation in India, currently a $30 billion opportunity led by pharma services and healthtech, is seeing increased investment in medtech and biotech. With rising consumerization of health, global value chain changes, and regulatory support, this innovation opportunity is projected to reach $60 billion by FY 2028, alongside ecosystem shifts like consolidation and new partnerships.

The Ministry of Health and Family Welfare (MoHFW) is committed to rapidly immunization coverage and consolidate the health systems strengthening efforts keeping in mind the socio-cultural practices and beliefs in child immunization among tribal communities in India. Universal Immunization Programme (UIP) is one of the largest cost-effective public health interventions targeting close of 26.7 Million newborns and 29 Million pregnant women annually for reduction of vaccine preventable under-5 mortality rate, by providing free of cost against 12 vaccine preventable diseases. The hospital sector in India was valued at Rs 7,940.87 Billion in FY21 in terms of revenue & is expected to reach Rs 18,348.78 Billion by FY 2027, growing at a CAGR of 18.24%. The Indian healthcare market enjoyed a robust Compound Annual Growth Rate (CAGR) of 22.52% between 2016 and 2022, highlighting its rapid growth trajectory. The healthcare profit pools will grow at a 4% CAGR from $654 billion in 2021 to $790 billion in 2026.

Pros and strengths

Strong geographical presence in Uttarakhand: The company’s strong geographical presence in Uttarakhand is exemplified by its network of 19 tier two cities and towns. This extensive network allows it to serve a diverse population, ensuring that residents in both urban centers like Dehradun and remote villages have access to high-quality diagnostic services. Its facilities are positioned to maximize accessibility, with twelve centres located near major medical institutions and commercial hubs, enhancing patient convenience and service efficiency. From the Fiscal year 2024 till December 2024, it has conducted over 28.87 lakh diagnostic tests across its Uttarakhand network, reflecting its significant role in the regional healthcare landscape. This widespread presence not only allows it to meet the needs of a broad patient base but also enables it to maintain consistent service quality and operational efficiency.

Dedicated management team with significant industry experience: The company is guided by a team of experienced professionals with complementary skills that are crucial for navigating the rapidly expanding Indian diagnostic market. Its management team brings extensive experience in the healthcare industry, and under their leadership, it has achieved significant growth. Over the past several years, it has enhanced both the productivity and efficiency of its network. Several key members of its management team including its Managing Directors, Non-Executive, SMPs have extensive functional and industry experience. Notably, its Promoter and Managing Director, Amar Singh, has over 20 years of experience in the diagnostics industry. Its Promoter and Managing Director, Asmita Singh, has more than two decades of expertise in marketing.

Integrated diagnostics provider with one-stop solution offering pathology and radiology testing, and medical consultation services: As of December 31, 2024, the company provides a wide range of 1,496 tests across different specialties. Its test menu includes (a) 481 routine pathology tests, covering basic biochemistry and hematology, as well as 1,015 specialized pathology tests, such as immohistopathology, and molecular pathology, and (b) 545 radiology tests, including basic x-rays, ultrasonography (USG), computed tomography (CT), magnetic resonance imaging (MRI), and specialized CT scans. Its radiology facilities have eleven CT scanners and four MRI machines. For the period ended December 2024, its sale of products accounted for 47.00% of its total revenue, pathology services made up 34.22% of its total revenue, while radiology services accounted for 18.77% of its total revenue.

Risks and concerns

Majority of revenue comes from B2C and few other customers: The company offers a comprehensive diagnostic network, that is in the business of selling of consumables like X-ray films, reagents for laboratory testing and other consumables necessary for healthcare operations and providing both pathology and radiology testing services. The company has garnered 33.67% 36.08% and 26.93% of total revenue from one customer in FY24, FY23 and FY22 respectively. The company has also garnered 34.13%, 31.70% and 55.83% of its total revenue from Walk-in Customers (B2C) in FY24, FY23 and FY22 respectively. The company typically does not enter into long-term agreements with its customers, which significantly limits its ability to predict future revenues. The majority of its customer agreements are short-term, and there is no guarantee that its existing customers, whether corporate or walk-in, will continue to engage its services. Any substantial decline in the number of corporate clients or walk-in customers, non-renewal of contracts, or termination of existing customer relationships could materially and adversely affect its business, financial condition, and results of operations.

Geographical constrain: The company offers a comprehensive diagnostic network, providing both pathology and radiology testing services. As of December 31, 2024, it operates in more than 23 cities and towns across Uttar Pradesh and more than 19 cities and towns in Uttarakhand. However, a substantial portion of its operations is concentrated in Uttar Pradesh. The company has garnered 67.74%, 69.01% and 82.35% of its revenue from Uttar Pradesh in FY24, FY23 and FY22 respectively. A regional economic slowdown in northern India, along with potential issues such as political or civil unrest, disruptions, disturbances, or prolonged economic downturns affecting demand for its services in Uttar Pradesh or Uttarakhand, could adversely impact its business, operational results, cash flows, and financial condition. 

Source majority of its medical consumables from Uttar Pradesh only: The company relies heavily on domestic third-party suppliers for the majority of its medical consumables, with a significant portion sourced from Uttar Pradesh. For the period ended December 31, 2024 and in Fiscal Years 2024, 2023, and 2022, it procured 92.29%, 92.79%, 94.15%, and 93.73% of its total purchases, respectively, from this state. The company’s success depends on the uninterrupted supply of medical consumables required for its diagnostic centres. It does not have long-term contractual arrangements with its suppliers and procure medical consumables through purchase orders entered into with its suppliers. Relying on a single state for medical consumables procurement exposes the company to regional risks that can significantly disrupt operations. The lack of diversification in sourcing exposes the company to these uncontrollable factors, leaving it vulnerable to disruptions without alternative supply options. Over the past three fiscal years, there have been no instances of such supply disruptions, however there can be no assurance that the same might continue in future. 

Outlook

Chandan Healthcare runs diagnostic centres in North India with pathology and radiology testing services. As of December 31, 2024, the company operates one flagship laboratory, seven central laboratories, and twenty-six satellite centres, with over three hundred collection centres in more than 23 cities across Uttar Pradesh and over 19 in Uttarakhand. The company has integrated diagnostics provider offering pathology, radiology testing, and medical consultations. It also has a track record of profitability and consistent financial performance. On the concern side, the company is dependent on B2C and few other customers for a major part of its revenues. Further, it does not enter into long-term arrangements with its customers and any failure to continue its existing arrangements could adversely affect its business and results of operations. Moreover, its operations are only focused on Uttar Pradesh and Uttarakhand, and any loss of business in such region could have an adverse effect on its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 67,52,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 151-159 per equity share. The aggregate size of the offer is around Rs 101.96 crore to Rs 107.36 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations in the financial year 2023-24 is Rs 17,659.01 lakh. This represents 29.00% increase compared to the previous financial year's revenue from operations of Rs 13,688.94 lakh. This increase is primarily due to increase in sales from products of Rs 1,765.22 lakh and sales from services of Rs 2,203.75 lakh. Moreover, the Profit After Tax (PAT) for the financial year 2023-24 reached Rs 1,635.51 lakh, marking a notable increase from Rs 358.63 lakh in the financial year 2022-23.

The company intends to strengthen its presence in the regions in which it operates, with emphasis on Uttar Pradesh. Its diagnostic centres are primarily located in urban regions of Uttar Pradesh. To capitalize on its existing brand equity, it intends to expand its operations further into sub-urban regions of Uttar Pradesh i.e. Ayodhya, Ashiyana and Jankipuram, and replicate its existing performance. It also intends to enhance its pathology and radiology test offerings by creating customized packages to its customers, based on customers’ age, sex and medical history, to cater to specific their needs. These packages will increase revenue per customer visit. Its dedicated sales and marketing team will continue to promote its specialty tests and disease specific profiles and grow its corporate customer base by marketing its healthcare proposition to human resource departments and other corporate decision makers.