Thought the craze for initial public offerings (IPOs) has turned dry? Well, the tables have turned quite quickly. With COVID-19 new mutants scaring the world again, the need for hospitals, pharmacy retailers and diagnostic players seem to catch the momentum. The pharmacy retail space is still largely an unorganised sector in India, but with MedPlus Health Service and Wellness Forever Medicare launching their IPOs, the space becomes tempting. Let's see what lies in this space!
What’s Happening?
There's intense competition in the pharmacy retail space, considering it’s largely an unorganised market. MedPlus and Wellness Forever both have filed their draft red herring prospectus for an IPO. MedPlus’ IPO has already opened, with a price band at Rs 780-796 per share, to raise Rs 1,400 crore. One point to keep in mind here is that even though the pandemic elevated the pharmacy sector to the front, it is still a thin-margin business.
Among the main competitors in the biz, Apollo Pharmacy rules this space with about 4,118 stores in India. MedPlus operates 2,081 stores and Wellness has 223 stores. However, if we check the figures from 2018 to 2021, Wellness’ stores have grown the highest with 26.7% CAGR as compared to Apollo’s 9.6% CAGR and MedPlus’ 12.2% CAGR. Other than that, Wellness continues to paint a rosy picture amongst its competitors. Let’s continue to read why!
Why Wellness Forever?
The biggest selling point for this company remains its institutional investor Adar Poonawalla, who owns the Serum Institute of India. Poonawalla has been an investor in Wellness since 2016.
Moreover, Wellness serves a product mix of pharma drugs and FMCG products, while MedPlus is focused mainly on selling pharma products. Even though MedPlus has more stores than Wellness, it earns less. Wellness earns Rs 4.70 crore revenue per store, while MedPlus earns Rs 1.59 crore per store. 45% of Wellness revenue comes from its FMCG products that deliver higher margins than pharma products. Furthermore, Wellness Forever is bigger than a normal pharma retailer. It is almost 1,000 per sq ft.
What Is The Future?
MedPlus is in a sticky position considering it wants to aggressively expand with less capital in hand. It takes Rs 30 lakh to set up one store, and the company is planning to open 800-1,000 stores. This highlights the fact that despite the IPO, the company will need to raise more money. The performance of the company on its listing day will give an understanding of investors’ interest in the pharmacy retail space. Meanwhile, Wellness could buy out sometime before getting launched.
