Wellness Forever Medicare Ltd IPO

Upcoming DRHP

IPO Synopsis

IPO synopsis:
The Adar Poonawalla backed pharmacy giant- Wellness Forever Medicare, filed a Draft Red Herring Prospectus with SEBI on October 1, 2021. The company plans to raise between Rs.1,500-Rs.1,600 crore. This IPO comprises of a fresh issue worth Rs.400 crore and an offer for sale of up to 16,044,709 equity shares. As a part of the OFS, Ashraf Biran and Gulshan Bakhtiani are offloading around 7,20,000 equity shares each, Mohan Chavan is offloading approximately 1,20,000 equity shares and an approximate 144.85 lakh shares are being offloaded by the other shareholders.
 This Mumbai based pharmacy chain is the second pharmacy chain to file for an IPO after MedPlus, based in Hyderabad, filed its DRHP in August. The book running lead managers to this issue are IIFL Securities Ltd, Ambit Private Ltd, DAM Capital Advisors Ltd and HDFC Bank Limited.

Objectives of the issue:
The company plans on utilizing the proceeds from the issue for-
•    Rs. 70.20 crore as funding to set up new outlets
•    Rs.100 crore to be set aside for repayment or prepayment of debt 
•    Rs.121.90 crore to fund working capital expenses

About Wellness Forever Medicare Ltd

Wellness Forever Medicare was founded in 2008 by three veterans in the pharmaceutical industry- Ashraf Biran, Gulshan Bakhtiani and Mohan Chavan. The company has 236 stores across 23 cities in Maharashtra, Karnataka and Goa. They have a registered customer base of 6.7 million customers as of June 31, 2021. They aim to increase their market penetration in the Tier 2 and Tier 3 cities and also actively participate in the e-commerce segment which has an estimated growth CAGR of 45%. 
The Indian pharmacy retail sector has been growing at a very healthy rate because of the increase in healthcare expenditure and consumer base. India’s pharmaceutical industry is the third largest in the world by volume and 14th largest by value. The market value of the Indian pharmaceutical market is Rs.150,000 crore in FY20. 
Pharmacy chains have 8.5% of the total pharmacy retail market in India in FY 2021.The company opened 31, 35 and 50 stores in FY19, FY20 and FY21 respectively. Out of these, 115 stores are operational as of June 30,2021. An approximate Rs.456.54 million is estimated as the cost of all the stores opened by the company in the last three fiscal years. Wellness Forever Medicare has a goal of opening 180 stores by FY24.  
 

Financials:

 

Particulars

(In Rs cr)

FY21

FY20

FY19

Revenue

924

863.25

676.98

PAT

-34.85

-5.32

-1.33

EPS (In Rs)

-7.11

-1.16

-0.31

 

Particulars

(In Rs cr)

FY21

FY20

FY19

Total Assets

608.75

476.59

382.30

Total Borrowings

102.39

83.15

81.54

Equity Share Capital

6.34

6.17

5.70

 

Peer comparison:

Revenue from operations

Company (in Rs Cr)

FY21

FY20

FY19

Apollo Pharmacy

5610

4821

3886

MedPlus

3069

2871

2273

Wellness Forever

892

871

684

Emami Frank Ross

NA

447

405

Thulasi Pharmacy

NA

139

125

 

EBITDA Margins

Company (in %)

FY21

FY20

FY19

Apollo Pharmacy

6.40

6

5.20

MedPlus

5.70

3.45

2.89

Wellness Forever

NA

3.74

3.98

Emami Frank Ross

NA

46

40

Thulasi Pharmacy

NA

3.37

2.40


They Key points are- 

Key Points

  • Strengths

    1. The company has a high inventory turnover which reduces the holding cost which in turn increases the working capital efficiency
    2. Customer loyalty programs and great customer service
    3. Due to vertical integration and economies of scale, they have a high gross margin
    4. Discounts for customers which make the store more attractive to more people
    5. E-commerce presence that provides auto refills, discounts and a wide range of products
     

  • Weaknesses

    1. They have a very limited presence, concentrated mainly in Maharashtra
    2. E-commerce segment lacks in profitability to date
    3. The company has difficulty in catering to the Tier 2 cities due to higher turnaround time

  • Opportunities

    1. The modern pharmacy retail is expected to have a growth CAGR of 25% in next 5 years, growing significantly faster than many other segments
    2. The brick and mortar stores have a certain edge over e-pharmacy in adopting an omni-channel approach because they have already established network of stores which can supply the localities and act as a place to stock more inventory
     

  • Threats

    1. As the company is not very technologically advanced, there is always a chance that mismanagement of the inventory could occur which would in turn lead to a low fulfillment rate
    2. High amount of competition from established e-pharmacy companies
     

How to apply for an IPO?

  • Login to your 5paisa account and select the issue in the current IPO section

  • Enter the number of lots and price at which you wish to apply for

  • Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange

  • You will receive a mandate notification to block funds in your UPI app

  • Approve the mandate request on your UPI and funds will be blocked

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