Thyrocare Technologies Ltd.

- IPO

Type
Size
Offer Price
Minimum subscription
Listing
Bid/Issue opens
Bid/Issue closes
Shares on offer
Face Value
Pre/Post-issue promoter holding
Promoters
Lead Managers

Issue Summary
Public Issue, 100% Book building
Rs 4.51 bn to 4.79 bn
Rs 420 to Rs 446 per share
Minimum- 33 shares
BSE and NSE
27-April-2016
29-April-2016
Rs 420 to Rs 446 per share

Rs 10 per share
64.96% / 63.96%
Dr A. Velumani, Mr A. Sundararaju
JM Financial, Edelweiss, ICICI Securities

Objects of the issue

The proceeds from offer for will go promoter and investor selling shareholders.
Company will not receive any proceeds from the sale of equity shares in the Offer.
Apart from the promoter and promoter group shares, Agalia one of the leading
shareholders, will be selling its major shareholdings.

Company background
1.

Business

Thyrocare Technologies Ltd (TTL) is one of the leading pan-India diagnostic

chains and conducts an array of medical diagnostic tests. The company was
incorporated in 2000, and has developed various brands since its inception. Under
the its flagship brand Thyrocare, the company undertakes diagnostics testing. It
undertakes tests for thyroid and non-thyroid based on different technologies. The
company derives 85% of its business from B2B clients, apart from providing
services directly to customers, and has a network of 1,041 authorized service
providers. This comprises 687 TAGs (Thyrocare Aggregators) and 354 TSPs
(Thyrocare service providers) that operate under franchise agreement with TTL.
Through this network, the company serves hospitals, laboratories, diagnostic
centers, nursing homes, clinics and pathologists across India.

Thyrocare generates major portion of its business (approximately 54% for

9mFY16) from Aarogyam. It provides services in Wellness and Preventive care.
Increasing awareness of the benefits of preventive testing has been gaining
momentum over the years. The company conducts tests for vitamin profile,
diabetic screens, liver, cholesterol and thyroid deficiency and so on.
Through its subsidiary National Healthcare Ltd (NHL), the company has
developed a network of molecular imaging centers (radiology) focusing on early
and effective cancer monitoring. This subsidiary is largely involved in scans of
full body for the cancer patients. NHL was incorporated in January 2011 and still
a loss making company and contributes approximately 7% to the company's
revenues (for 9mFY16).
WHATERS and Sugar Scan are some of the other brands. WHATERS currently
conducts the following tests: physical and chemical testing, elements testing,
microbiology testing, pesticide testing and volatile organic compounds testing in
water. Through the brand Sugar Scan, the company offers a sugar scan blood
glucose monitor, which is one of the simplest ways for patients to instantly
determine their blood glucose levels at an affordable cost.
As of Feb 2016, the company offered 198 types of tests and 59 profiles of tests.
These tests involved detection of disorders, like thyroid disorders, growth
disorders, metabolism disorders, auto-immunity, diabetes, anemia, cardiovascular
disorders, infertility and various infectious diseases. The company's laboratory
processes over 30,000 samples and above 1 lakh investigations every day.
TTL primarily operates its testing services through a fully automated Central
Processing Laboratory (CPL), located in Navi Mumbai, and is supported by 5
Regional Processing Laboratories (RPL). These RPLs are located at New Delhi,
Coimbatore, Hyderabad, and Kolkata. A new RPL was recently established in
Bhopal to route more tests. CPL performs all tests offered, while the RPLs are
equipped to perform the tests that are more routine in nature and conducive to
high-volume testing.
TTL obtains its machinery, instruments and other equipment from international
and Indian vendors, such as Siemens Limited, Transasia Bio-Medicals Limited,
Abbott, etc

2.

Key management personnel

Dr. A. Velumani is the Chairman, CEO and Managing Director. Dr Velumani is a

graduate in science from the University of Madras and has a post graduate degree
in science from the University of Bombay and a doctorate in philosophy (science)
from the University of Bombay. He has over 19 years of experience in the
diagnostics business. Dr Velumani has worked for over 12 years as a scientific
officer specialising in immunodiagnostics in general and radioimmunoarrays in
particular, at the Bhabha Atomic Research Centre. He standardised various
immuno, analytical and biotechnological techniques during his tenure at the
Bhabha Atomic Research Centre.
A. Sundararaju is an Executive Director and Chief Financial Officer of the
company. He is a graduate in law from the University of Bombay. He has over 18
years of experience in finance, legal and administrative activities. He has been in
charge of the finance, legal, administrative and franchisee departments of the
company since 1996.

Reasons to apply
1.
2.
3.
4.
5.

Diagnostics gaining importance due to evidence-based treatment

Well positioned and established healthcare brand in the diagnostics segment
Hub and Spoke model helps achieve economies of scale
Asset light model leads to efficient utilization of capital
Good financial performance, however return ratios are declining

Reasons not to apply

1.
2.
3.

Intense competition in diagnostics industry

Increase in RPLs could increase fixed costs and operating costs.
Outstanding litigations and failure to comply with regulatory requirements

Comparative valuations & Concluding remarks

After the listing of Dr Lal Pathlabs Ltd, TTL is the second diagnostics company to
get listed in the Indian markets. With limited number of listed companies in the
diagnostics segment in India, compared the company's valuations with diagnostics
companies listed in the US. Thus, if look at diagnostic companies listed in the US,
Laboratory Corp of America Holdings is valued at a P/E multiple of 28.06 times,
Quest Diagnostics Inc. is valued at P/E multiple of 15.5x.

Comparative valuations
Name of company/Sector

DP/E multiple

Laboratory corp of America Holdings

Quest Diagnostics Inc
Dr. Lal Pathlabs Ltd
Thyrocare Technologies Ltd

28.06 (on ttm basis)

15.5 (on ttm basis)
87.2 (on ttm basis)
38.9-41.3 (on 9MFY16)

TTL's stock is valued at P/E multiple in the range of 41.3-38.9 times its annualized
9mFY16 earnings, which appears to be very expensive.

Therefore, I recommend investors to ?????? the IPO

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