On Vijay Diagnostics
I think it is one of the best companies in the diagnostic space. The numbers speak for themselves. They have been one of the most profitable companies in the space. Their model is a bit differentiated. They do not go with the PPP model. They are in limited geographies and do not have a pan India footprint, but they have been doing a pretty good job of the business that they have. In AP and Telangana, they are the undisputed kings.
They have expanded in eastern India and are getting very good traction there. On top of everything, the icing on the cake is the combination of business along with pathology which all the companies have. They have a radiology component. This space is a very interesting play and technological skills and technology integration have been fantastic.
If you look at the growth scope for these guys, they can go deep into the geographies they are in and they can expand in the neighbouring states and also of course the acquisition route is open to them.
Overall, we like the diagnostic business, we like Vijay Diagnostics and we also like their valuation. I think a big thumps up has been received in terms of the investors who have already come in at a pre IPO stage yesterday. Investors should go in and apply for this. There is an opportunity for both listing gains as well as holding it long term.
The diagnostic space got rerated suddenly and started being seen as a very serious area for long term investment thanks to Covid. Also a lot of deals including the Thyrocare buyout has happened. So, the area is no longer very appealing in terms of valuations. Do you think Vijaya may go for buyout opportunities as well for chasing growth?
Something which is good, does not come cheap. One can wait for some correction in the market but I do not believe in that. If you get a good stock, you buy it at the right valuation. The scope for growth in diagnostics is huge. Covid and related problems have accelerated their growth momentum and also brought them to the attention of the investors. But the fact remains that even without Covid, some of these businesses have been growing very fast and Vijaya Diagnostics in particular has a stellar track record of growth.
They were the fastest growing and most profitable diagnostic chain in the country. In the geographies they operate, they are dominant and going forward they have opportunity for significant inorganic expansion. They hardly have any debt. Now whether a buyout like Thyrocare or a buyback can happen is a matter which future will decide. But at this stage, we see strong growth potential in the sector and Vijaya Diagnostic is one of the companies which can definitely capture that growth very well. As for valuation, if you compare it vis-à-vis peers, it does not look out of sync and investors can go in for this script.
The other IPO that you like is the Aditya Birla AMC IPO. Why do you like it?
This is one of the top asset management companies in the country. They have been in the business for a very long time. They have a stellar track record. I am very conservative but if you really see the potential of the asset management space in India and with what is happening all around us, the sky’s the limit for the asset managers as far as India is concerned.
We are just scratching the surface with significant growth potential and I think the pandemic has shown us an increase in the number of participants in capital market, increase in the number of retail investors in the asset management category and all that augurs well for a company like Aditya Birla AMC, We believe in the team, we believe in the management, we believe in the business. By and large, this is a sunrise sector one needs to participate in.
