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Carlyle-backed Metropolis Healthcare’s IPO covered 9% on first day
Photo Credit: VCCircle

Pathology chain operator Metropolis Healthcare Ltd’s initial public offering (IPO) began on a slow note on its first day of bidding on Wednesday with demand from institutions and retail investors.

The public offering of 7.66 million shares, excluding the anchor allotment, received bids for a little over 7 lakh shares. The book was subscribed 9.15% at the end of day one, stock-exchange data showed.

The qualified institutional buyers (QIBs) category saw nearly 9% demand out of 4.01 million shares set aside for them. Three-fourth of the shares in the IPO will be allocated to institutions, and the bucket needs to be fully subscribed for the offer to sail through.

The quota of shares reserved for retail investors was covered 25%, while non-institutional investors such as corporate houses and affluent individuals placed orders for 2.5% of the shares reserved for them.

Metropolis’ IPO will close on Friday.

On Tuesday, Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) and the private equity arm of Edelweiss Financial Services Ltd were part of the investors who acquired Metropolis’ shares in the anchor allotment.

In all, Metropolis raised Rs 530.04 crore ($76.69 million) by allotting 6.02 million shares to 26 investors at the upper end of the Rs 877-880 per share price band.

Metropolis has sought a valuation of Rs 4,415.72 crore ($637.64 million) through the IPO.

The Rs 1,204-crore IPO is entirely a secondary market sale by the promoter Dr Sushil Shah and private equity investor The Carlyle Group. It will result in a 27.27% stake dilution. The selling shareholders will get all the money raised via the IPO. The company will not receive any proceeds from the offering.

An IPO might help the founders repay the debt they had taken on to buy out PE firm Warburg, an investment banker had told VCCircle recently.

JM Financial, Credit Suisse Securities (India) Pvt. Ltd, Goldman Sachs (India) Securities Pvt. Ltd, HDFC Bank Ltd and Kotak Mahindra Capital Co Ltd are managing the public issue.

The overall issue size is trimmed to 13.68 million shares as against 15.26 million shares at the time of filing its draft papers. This is perhaps because it anticipated a higher valuation, which has since been tempered by a market meltdown triggered by a crisis in the shadow banking segment.

Carlyle, which invests in both growth and buyout deals in India out of its Asia funds, will sell 7.41 million shares compared with 10.25 million shares it had proposed to sell last September.

Metropolis will become the third diagnostics chain to list its shares on the stock exchanges. The diagnostics sector had burst into the limelight in late-2015 after Dr Lal PathLabs became the first of its kind to get listed on the bourses. Smaller peer Thyrocare followed suit in 2016 with a spectacular listing.

According to Frost & Sullivan, the Indian diagnostics market was valued at Rs 59,600 crore in the financial year 2017-18, and is projected to grow to around Rs 80,200 crore by 2019-20, driven by favourable changes in demographics, improvements in health awareness, increased spend on preventive care, increase in lifestyle-related ailments and other factors.

Metropolis’ history dates back to January 1980 when Dr Shah started the pathology business as a partnership firm under Dr VK Desai’s Hospital.

It now operates in 19 states in India with a strong position in the western and southern regions. It offers a range of clinical laboratory tests used for prediction, detection, diagnostic screening, confirmation and monitoring of diseases.

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