The year 2021 saw more than 60 companies come up with their Initial Public Offerings (IPO) raising around ₹1.2 lakh crores from investors. Moreover, with the stock markets remaining upbeat throughout the year, the appetite for risks among investors increased significantly. From Burger King to Paytm, almost all the IPOs were oversubscribed by investors. This has set up the stage for 2022. Various giant IPOs such as that of the NSE, LIC and Delhivery are lined up for this year. In this article, we’ll explore about a company named ‘Wellness Forever Medicare Limited’ who is about to come up with an IPO.
About the company
The company is India’s third largest pharmacy and wellness network by number of stores, with a leading position in Western India in terms of total revenues. It operates a large Omni-channel, hyper local retail network under the “Wellness Forever” brand, serving as a one-stop solution for the customers’ wellness needs. Most of their stores operate 24*7.
The company opened its first store in 2008 and has since then expanded with a network of 236 stores in 23 cities across Maharashtra, Karnataka, and Goa serving a customer base of 6.7 million customers as of June 30, 2021.
Their stores offer a wide assortment of merchandise comprising of 91,500 pharmaceutical and wellness products, and each of their stores feature an average of 13,000 products!
The products
- Following are the products that the company deals in:
- Pharmaceutical products: These include both OTC and prescription medicines.
- Fast-moving consumer goods: Includes foods, baby care products, and the rest.
- Surgical products: Includes medical devices
- Premium label products: Constitutes of pharmaceutical and FMCG products that have margins over 30%.
Objectives of the IPO
- From the IPO proceeds, the company wants to accomplish the following objectives:
- Funding capital expenditure for setting up of new stores. The amount used for this purpose would be ₹70 crores.
- Repayment/prepayment, in part or full, of all or certain borrowings. The amount used towards this objective will be ₹100 crores
- Funding the incremental working capital requirements of our company and the amount used for this purpose is around ₹120 crores.
- General corporate purposes
Wellness Forever Medicare Limited IPO Timetable
| IPO Open Date | Jan 2022 |
| IPO Close Date | – |
| IPO Size | ₹ 1500 Cr |
| Fresh Issue | ₹ 400 Cr (approx.) |
| Offer for Sale | 16,044,709 Equity Shares |
| Face Value | ₹ 2 Per Equity Share |
| Price Band | ₹- to ₹- Per Equity Share |
| Listing Exchanges | BSE and NSE |
| QIB | 75% |
| NII | 15% |
| Retail | 10% |
| Discount | N/A |
| Allotment Status | Check Here |
Key risks
There are certain key risks that the company may face in the future. They are:
- As the company operates physical stores, risks due to partial or full lockdowns can arise due to the further spread of different Covid-19 variants.
- All of the company’s properties are leased, so any issues in lease arrangements in the future could lead to business disruptions.
- The company has incurred losses in the past three years and the road to profitability is still not clear.
- Regulatory bodies changing the prices of essential drugs that the company sells can impact its product margins.
- All of the company’s revenues are generated in Maharashtra, Karnataka, and Goa. Any adverse events in this region could affect the company’s business operations.
Also Check
Key strengths
The key strengths of the company are:
- The company provides a unique retail platform within India’s fast growing pharmaceutical sector. It offers a hyper local, Omni-channel retail experience that goes beyond the traditional drugstore model.
- The company has a track record of retail footprint expansion, both in number of stores and retail space.
- The company owns the valuable and trusted “Wellness Forever” brand.
- The company has a dynamic and experienced management team.
- The revenues that the company derived from the sale of non-pharmaceutical products were up 46% of sales in FY21 from 36% of sales in FY21. This was a better metric when compared to the company’s competitors.
Fundamentals of the company
The company’s revenue from operations increased from ₹677 crores in FY19 to ₹924 crores in FY21, registering a CAGR of 16.8%. Also, the company’s EBITDA increased from ₹73.4 crores in FY19 to ₹81.4 crores in FY21, registering a CAGR of 5.36%. The company’s sales margin decreased slightly from 28.49% in FY19 to 27.23% in FY21. However, the company’s losses increased from ₹1.3 crores in FY19 to ₹34.8 crores in FY21.
The company’s revenue per square feet has also declined from ₹65,387 in FY19 to ₹57,291 in FY21. It expanded its total retail space from 117,277 square feet in FY19 to 182,415 square feet in FY21.
Peer comparison
According to the company prospectus, although it has several competitors, it believes that it has no listed peers in India, hence comparisons cannot be made.
Conclusion
The company filed its draft IPO prospectus with the Securities and Exchange Board of India (SEBI) in October 2021. But it has not yet got the approval. As a result, the company could not yet finalize the IPO price of its shares and the valuations.
Discussed above are the comprehensive pointers such as the company information, key risks, key strengths, and business fundamentals that can help you to evaluate it accurately when the company comes up with the IPO prize and the dates.
