Neuberg Diagnostics looks to raise up to ₹1,500 crore via IPO

The diagnostics chain, led by healthcare veteran G.S.K Velu, has hired Kotak Investment Advisors Ltd and ICICI Securities Ltd as investment bankers for managing the IPO, the person said, requesting anonymity.

Neuberg Diagnostics is among India’s top pathology laboratory chains, with more than 150 laboratories and over 2,000 collection centres. It is also present in South Africa, the US and the United Arab Emirates.

The company, looking to expand its operations, has been planning an IPO for some time. In an earlier interview, Velu, chairman of Neuberg Diagnostics, indicated plans for an IPO by the end of the fiscal year, or during the first quarter of FY24, depending on market conditions.

The markets that turned volatile after Russia invaded Ukraine have stabilized, boosting investor confidence. Since September, more than a dozen companies have gone public. The IPOs include Global Healthcare Ltd, with an issue size of ₹2,205 crore; and Archean Chemical Industries Ltd, Five-star Business Finance Ltd and Fusion Micro Finance Ltd, with issue sizes of ₹1,100-1,600 crore. Others, such as Inox Green Energy, Bikaji Foods International Ltd and Kaynes Technology India Ltd, too, completed their IPOs.

However, the share prices of diagnostic stocks such as Dr Lal PathLabs Ltd, Thyrocare Technologies Ltd and Metropolis Healthcare Ltd have been under pressure during the past year because of intense competition from new entrants, especially online service providers such as Healthians,Tata 1mg and others. Declining covid testing has also impacted revenues. However, non-covid revenue is growing well.

Analysts said some of the new-age firms took a price hike, and they expect the trend of rising prices to continue, likely providing some respite to price pressures in the industry. Analysts at BNP Paribas noted that competition from low-price service providers is not a structural threat as diagnostics has been largely a fragmented and unorganized industry in India, and low-price firms have been present for a long time. The key segment targeted by new-age companies is preventive health, which is only 10% of the total market.

Listed diagnostic companies also benefit from the shift from the unorganized to the organized sector. Also, consolidation continues, and companies are expanding their reach and regional presence through organic routes.

Neuberg also had made several acquisitions, including those of Bengaluru-based Anand Diagnostics, Ahmedabad-based Supratech Micropath, Pune-based AG Diagnostics, Chennai-based Ehrlich Lab and a few others.

Its plans include expanding into India’s northern and eastern regions and overseas markets.