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Vaidya Sane NSE SME IPO review (Avoid)

Review By Dilip Davda on February 2, 2022

•    VSAL is claiming to be a unique medical service institution proving Ayurved based treatments. 
•    It has posted erratic financial performance so far. 
•    Around 80% of IPO proceeds are to be used for advertising and branding which is a major concern.
•    The issue is exorbitantly priced and may be ignored. 

Vaidya Sane Ayurved Laboratories Ltd. (VSAL) is claiming to be a unique medical service institution that strives to treat chronic ailments like cardiac disease, diabetes, hypertension and obesity with the distinctive outlook of amalgamating technology with the traditional healing of Ayurveda.

Its approach to treatment using non-invasive, multidisciplinary and innovative therapies has helped establish it as a dependable option for treating chronic ailments. VSAL is a health care provider primarily in India's chronic care ecosystem. The company provides healthcare services through Madhavbaug clinics. As of November 30, 2021, it operates 274 clinics across Maharashtra, Madhya Pradesh, Gujarat, Uttar Pradesh, Goa, Karnataka, Delhi and Chhattisgarh. Out of these 52 are company-owned and 222 are franchise clinics. Madhavbaug offers a 360-degree ecosystem to its patients.

VSAL also operates two cardiac prevention and rehabilitation hospitals in Khopoli and Nagpur respectively. Vaidya Sane's Ayurvedic Education and Agricultural Research Trust is providing noninvasive medical services through the Khopoli Hospital. The company has entered into MOU dated April 1, 2019, with Vaidya Sane's Ayurvedic Education and Agricultural Research Trust for the entire management, medical services and treatments being carried out at Khopoli Hospital. In consideration, the trust shall pay the Company 80% of the total fees/ amount received by it under this arrangement on monthly basis after providing for all reasonable expenses and applicable taxes.

To part finance its plans for branding and advertising (Rs. 16.00 cr.) and general corporate purpose (Rs. 3.73 cr.), VSAL is coming out with a maiden IPO of 2771200 equity shares of Rs. 10 each at a fixed price of Rs. 73 per share to mobilize Rs. 20.23 cr. The issue opens for subscription on February 10, 2022, and will close on February 15, 2022. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.36% of the post issue paid-up capital of the company. VASL will spend Rs. 0.50 cr. for this IPO process. 

The issue is solely lead managed by First Overseas Capital Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. BHH Securities Pvt. Ltd. is the market maker for the company. 

Having issued initial equity at par, the company issued further equity in the price range of Rs. 3.60 to Rs. 93.30 between May 2009 and October 2021. It has also issued bonus shares in the ratio of 154 for 1 in September 2021. Thus coffers are almost empty. The average cost of acquisition of shares by the promoters is Rs. 0.04 per share. 

Post-IPO, VSAL's current paid-up capital of Rs. 7.74 cr. will stand enhanced to Rs. 10.51 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 76.75 cr. 

On the financial performance front, for the last three fiscals, VSAL has posted turnover/net profits (loss) of Rs. 62.57 cr. / Rs. 0.50 cr. (FY19), Rs. 75.30 cr. / Rs. - (0.56) cr. (FY20) and Rs. 52.28 cr. / Rs. 1.55 cr. (FY21). For the first half of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 1.35 cr. on a turnover of Rs. 31.57 cr. The sudden boost in bottom lines for the last 18 months appears to be window dressing before the IPO to get higher valuations. Despite the highest top line, it suffered a setback for FY20 and in the following fiscals, on a lower top line it notched up higher profits which is raising eyebrows. What is more, for H1 of FY22 it against posted superb performance which appears to be the window dressing to fetch higher valuation.  

For the last three fiscals, VSAL has posted an average EPS of Rs. 0.96 and an average RoNW of 6.60%. The issue is priced at a P/BV of 4.58 based on its NAV of Rs. 15.95 as of March 31, 2021, but has not given any such data as of September 30, 2021, and at a P/BV of 2.24 based on its post-IPO NAV of Rs. 32.59. 

If we annualize its FY22 performance with super profits and attribute it to fully diluted post IPO equity, then the asking price is at a P/E of 28.29 and on the basis of the last three years average EPS the P/E stands at 76.04. Thus the issue is priced exorbitantly.  

As per offer documents, VSAL has no listed peers to compare with. 

The company has not declared any dividend since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

This is the 12th mandate from First Overseas in the last four fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount, 2 at par and the rest with premiums ranging from 1.4% to 120% on the day of listing. 

Conclusion / Investment Strategy

VSAL has posted erratic financial performance so far. It is priced exorbitantly based on its latest performance with super-profits. It is going to spend nearly 80% of IPO proceeds on advertising and branding which raises concern. There is no harm in ignoring this IPO.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on February 2, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Madhavbaug IPO FAQs

  1. 1. Why Madhavbaug IPO?

    The initial public offer (IPO) of Vaidya Sane Ayurved Laboratories Limited offers an early investment opportunity in Vaidya Sane Ayurved Laboratories Limited. A stock market investor can buy Madhavbaug IPO shares by applying in IPO before Vaidya Sane Ayurved Laboratories Limited shares get listed at the stock exchanges. An investor could invest in Madhavbaug IPO for short term listing gain or a long term.

  2. 2. How is Madhavbaug IPO?

    Read the Madhavbaug IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Madhavbaug IPO what should investors do?

    Madhavbaug IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Madhavbaug IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Madhavbaug IPO good?

    Our recommendation for Madhavbaug IPO is to avoid.

  5. 5. Is Madhavbaug IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Madhavbaug IPO.

  6. 6. When will Madhavbaug IPO allotment status?

    The Madhavbaug IPO allotment status will be available on or around February 18, 2022. The allotted shares will be credited in demat account by February 22, 2022. Visit Madhavbaug IPO allotment status to check.

  7. 7. When will Madhavbaug IPO list?

    The Madhavbaug IPO will list on Wednesday, February 23, 2022, at NSE SME.