The Securities and Exchange Board of India (SEBI) has issued its observations for Dr Lal Path Labs IPO. In its weekly update on its website, the capital market regulator said it cleared the IPO on 3 November. Including weekends and public holidays, it took SEBI 50 days to clear Dr Lal Path Labs IPO, making it the second fastest approval this year after Coffee Day Enterprises Limited which received regulatory approvals in 49 days. Kotak Mahindra Capital and Citigroup Global Markets India will manage the issue.
The Gurgaon-based diagnostic and pathology laboratories chain applied for the IPO on 14 September. According to the draft red herring prospectus (DRHP) filed with the regulator, the company plans to sell 11.6 million shares through offer for sale (OFS). As a result, the company will not receive any proceeds from the IPO.
Among the prominent selling shareholders are Dr Arvind Lal (1.26 million shares) while Dr Vandana Lal plans to sell 2.06 million shares. However, the biggest number of shares will come from Wagner Limited which aims to reduce its shareholding in the company by 5.86 million shares. Another 1.47 million shares will be offloaded by WCF (Westbridge Crossover Fund).
The size of the IPO will be finalized once the pricing of the IPO is announced. Earlier reports indicated the diagnostic and pathology laboratories chain planned to raise nearly INR700 crore (INR7 billion) with a post-issue valuation of nearly INR6,000 crore (INR60 billion).
Founded in 1949, Dr Lal PathLabs employs more than 3,000 people and serves almost 12 million customers a year. WestBridge made its first investment in the company in 2005 before being acquired by Sequoia Capital. However, a resurrected WestBridge, along with another PE player TA Associates, bought the original stake in February 2013 in a deal that valued Dr Lal PathLabs between INR1,500 crore and INR1,750 crore. At the midpoint of this valuation, WestBridge Capital Partners appears to be ready to part exit its position at a multiple of 3.7X. Sanjeevini Investment Holdings invested in the company in 2013.
Dr Lal Path Labs IPO will be an interesting one as it is a well-known and respected brand. The company posted a profit of INR879.7 million in the fiscal ended 31 March 2015 on revenues of INR6.4 billion. Both figures were up from previous year, marking a growing demand of the company’s services. In recent years, PathLabs also acquired some of its competitors including Kolkata-based Medicave Medical Systems and Ahmedabad-based APL Institute of Clinical Laboratory & Research. We intend to explore Dr Lal Path Labs IPO in greater detail once the company files its red herring prospectus.