Can Molbio Diagnostics IPO deliver long-term growth for high risk investors?
Molbio Diagnostics aims to secure ₹200 crore to enhance its capital expenditures through a new issuance of shares. In tandem, the firm intends to reduce promoter stake by generating ₹740 crore via an offer for sale. With six manufacturing sites worldwide, the company caters to over ninety nations and has seen substantial revenue growth attributed to its tuberculosis diagnostic test kits.
Molbio Diagnostics, a molecular diagnostics firm, aims to raise ₹200 crore via a new issue and ₹740 crore through an offer for sale. Following the IPO, the promoter group's stake will decrease to 43%, down from 46.6%. The company operates six manufacturing sites in India and serves over 90 countries, with government health programs, diagnostic labs, hospitals, and international health organizations as major clients. Over half of Molbio's revenue comes from top clients, indicating a significant customer concentration risk.
Established in 2000, the company focuses on research, development, and manufacturing of diagnostic solutions for both infectious and non-communicable diseases. Government and international aid agencies contribute over four-fifths of its revenue. Molbio has developed the Truenat platform, a portable diagnostics system tailored for resource-limited environments, providing accurate test results within an hour.
Their offerings include molecular testing for over 30 diseases through 43 assays, along with radiology, digital pathology, and breast health screening solutions via subsidiaries and strategic collaborations.
Revenue from operations increased by 31.5% annually, reaching ₹1,445.7 crore, with net profit growing by 40.2% to ₹164.1 crore between FY24 and FY26. Operating profit before interest, tax, depreciation, and amortization (EBITDA) rose 33.2% to ₹328.2 crore during the same period, with EBITDA margin expanding to 22.6% in FY26 from 22% in FY24.
The company's revenue from test kits accounts for nearly 74%, with 70% derived from diagnostic test kits for tuberculosis. Financially, Molbio demands a price-earnings (P/E) multiple of up to 57 based on post-IPO equity and FY26 net profit. However, with no direct Indian peers, its valuation is compared to healthcare diagnostics and medical device companies like Poly Medicure, Dr. Lal PathLabs, Metropolis Healthcare, and Vijaya Diagnostic Centre, which trade at P/E multiples ranging from 54 to 81.
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