QMS Medical Allied Services coming with an IPO to raise Rs 56.87 crore

QMS Medical Allied Services

• QMS Medical Allied Services is coming out with an initial public offering (IPO) of 47,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 121 per equity share.
• The issue will open on September 27, 2022 and will close on September 30, 2022.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 12.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is First Overseas Capital.
• Compliance Officer for the issue is Toral Jailesh Bhadra.

Profile of the company

The company is engaged in the marketing and distribution of a wide range of medical and healthcare devices and accessories. It markets and distributes these products to various end users such as clinics, pharma and medical companies and also to individual users. These devices are sold directly in the brand of the manufacturer and also under its own brand. The company has more than 600 SKUs which it sells to over 130 customers. The company has recently launched its brand “Q-Devices” with an intention to provide affordable and quality products in the market so as to become a customer preferred medical device company. The company gets its products manufactured in India from third party manufacturers, under its own brand. It markets and sells them under its own brand “Q-Devices”. The products sold under “Q-Devices” are affordable without compromising on the quality. It already has products such as glucometer, pulse oximeter, IR thermometer, BP Monitor, Anatomy set, Neurology kit, Orthopaedic Aids and Weighing Scales.

The company also deals in medical consumables such as disinfectants, filters, infection prevention tools, compression bandages, wound management dressing kits and dental products amongst others. It markets and help in distribution of the products across India through offline and online mode by means of its own website i.e. www.qmsmeds.com. The company also offers a range of evidence-based, scientific content medical programs, which are used in updating clinical knowledge and practices. Continuing medical education (CME) is a valuable mechanism to update physicians knowledge with ever-increasing plethora of contemporary advances within medical fraternity. It has been authorized by EACME (European Academy of CME) to market and conduct the medical programs offered by them in Indian market.

The aim of these programs is to impart global perspective to Indian to medical fraternity. The company aims to impact lives of people through continuous skill development and hence provides various medical courses like PG Diploma and MSC in Diabetes. It also conducts Masterclass, certificate and mentor mentee courses on behalf of ECAME. It also organizes various preventive and diagnostic camps (Patient Service Programs) in various therapy areas at its Health Care Partner (HCP) clinics pan India on behalf of various pharmaceutical companies. These camps also empower healthcare practitioners and help improve therapy outcomes for their patients. Some of the tests it organizes are Diabetic Retinopathy, Cardiology, Ophthalmology, Gynecology, Neuropathy, Tonometry, Holter ECG, ABPM etc.

Proceed is being used for:

• Funding working capital requirements.
• General corporate purposes.

Industry Overview

Healthcare has become one of India’s largest sectors, both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expenditure by public as well private players. India’s healthcare delivery system is categorised into two major components public and private. The government, i.e. public healthcare system, comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centres (PHCs) in rural areas. The private sector provides majority of secondary, tertiary, and quaternary care institutions with major concentration in metros and tier-I and tier-II cities.

The Indian healthcare sector is expected to record a three-fold rise, growing at a CAGR of 22% from 2016–2022 to reach $372 billion in 2022 from $110 billion in 2016. By FY22, Indian healthcare infrastructure is expected to reach $ 349.1 billion. As of 2021, the Indian healthcare sector is one of India’s largest employers as it employs a total of 4.7 million people. The sector has generated 2.7 million additional jobs in India from 2017-22 over 500,000 new jobs per year.

India is a land full of opportunities for players in the medical devices industry. The country has also become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of population. Besides, Indian medical service consumers have become more conscious towards their healthcare upkeep. India’s healthcare sector is much diversified and is full of opportunities in every segment, which includes providers, payers, and medical technology. With the increase in the competition, businesses are looking to explore the latest dynamics and trends which will have a positive impact on their business. The hospital industry in India is forecast to increase to Rs. 8.6 trillion ($132.84 billion) by FY22 from Rs. 4 trillion ($61.79 billion) in FY17 at a CAGR of 16-17%.

Pros and strengths

Well established goodwill and client relationships: The company manages a wide range portfolio of products which are being sold under its registered brand name “QDevices” and it is also engaged in marketing and distribution of other products. With its expanding business scope, its brand alongwith other brands, over these years has built a reputation by marketing and distributing wide range of medical products strong customer base and has established an unyielding marketing setup. The company’s existing client relationships help it to get repeat business from its customers. This has helped the company maintaining a long term working relationship with its customers and improve its customer retention strategy. Through these efforts, it aims to become the “first choice vendor” for all large and small pharmaceutical and medical companies which intend to procure products and services it offers for distribution as part of the branding, marketing and medical awareness initiatives.

Asset light business model and competitive products: The company’s business model for “QDevices” relies on its ability to design products that are of good quality, innovative and functional, through optimal sizing from a suitable manufacturer and it has long standing relationship with its vendors. This allows it to scale its operations quickly and the products are manufactured as per its specifications at a predetermined cost and as per its quality standards without incurring any capital expenditure on manufacturing facilities. It operates on an asset light business model which does not require it to invest heavily on physical assets such as plant and machinery, office equipments etc. and therefore this business model allows it to be capital efficient. The company’s business model is scalable, such that it can expand its geographical reach and distribution capacity and add new products efficiently without disrupting its existing business. Further, this also helps it in better cash flow management and lower risk.

Experienced promoter and management team with strong industry expertise: The Promoter of the company, Mahesh Makhija has significant industry experience and has been instrumental in the consistent growth of the company’s performance. Mahesh Makhija has industry experience of around 27 years and possesses business intellect in the marketing and trading circles of pharma industry as they have been engaged in such business through family proprietary concern since 2 decades. Further, the company is managed by a team of experienced personnel. The team comprises of personnel having technical, operational, marketing and business development experience. The company’s management team’s experience and their understanding of the pharmaceutical business will enable it to continue to take advantage of both current and future market opportunities.

Risks and concerns

Maximum revenues comes from limited number of customers: Revenue from its top 10 customers constituted 86.17%, 92.87%, 87.37% and 91.40% of its revenue from operations for the financial years March 31, 2022; March 31, 2021; March 31, 2020 and March 31, 2019 respectively. The company does not have firm commitment supply agreements with most of its customers and instead rely on purchase orders to govern the volume and other terms of its sales of products. The loss of any significant client would have a material effect on its financial results. The ocmpany cannot assure that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it lose any of them. While it is constantly striving to increase its customer base and reduce dependence on any particular customer, there is no assurance that it will be able to broaden its customer base in any future periods or that its business or results of operations will not be adversely affected by a reduction in demand or cessation of its relationship with any of its major customers.

Geographical constrain: Majority of the company’s business is based in Mumbai, Maharashtra. This concentration of its business in Mumbai Metropolitan Region, subjects it to various risks, including but not limited to the various risks like regional natural disasters; vulnerability to change of policies, laws and regulations or the political and economic environment of Western Indian and mainly Mumbai; constraints on its ability to diversify across states; and perception by its potential clients, that it is a regional advertising and marketing company, which hampers it from competing against other large companies at a national level. Further, any political disruptions, natural calamities or civil disruptions, opposition and protests, particularly in locations where it operates, could adversely affect its business operations or strategy. There is no assurance that such disruption in business operations would not bring any hindrance in the functioning of its manufacturing Units. Consequently, its business, results of operations, cash flows and financial condition have been and will continue to be heavily dependent on the performance of, and the prevailing conditions affecting the advertising and marketing industry and overall economy in Mumbai and Maharashtra.

Huge working capital requirement: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. Its, Trade Receivables for the financial years March 31, 2022, March 31, 2021 and March 31, 2020 were Rs 4204.46 lakhs, Rs 2298.18 lakhs and Rs 1121.23 lakhs respectively and its inventories for the financial years March 31, 2022, March 31, 2021 and March 31, 2020 were Rs 2425.46 lakhs, Rs 2030.83 lakhs and Rs 1569.47 lakhs respectively. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, the company must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if the management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Outlook

QMS Medical Allied Services is engaged in the marketing and distribution of a wide range of medical products as well as medical education services. The company's products are sold under brand name “QDevices” and they also manage the distribution for other brands such as 3M, Heine, Rossmax etc. The company offers medical products such as Blood Pressure Monitors, Glucose Monitoring Kits and strips, Dental Products, Personal protection kits eg-PPE kits, Infection prevention, Stethoscope and Oxygen Concentrator. On the concern side, substantial portion of the company’s revenues has been dependent upon limited number of customers. Moreover, the company’s business is geographically located in one area, Mumbai, Maharashtra and any loss or shutdown of operations at any of its facilities in this area may have an adverse effect on its business and results of operations.

The company is coming out with a maiden IPO of 47,00,000 equity shares of Rs 10 each. The issue has been offered at a fixed price of Rs 121 per equity share. The aggregate size of the offer is Rs 56.87 crore. On performance front, the revenue from operations for the FY 2022 is Rs 146.32 crore as compared to Rs 122.03 crore during the FY 2021 showing an increase of 19.90%. The sale of products was Rs 138.50 crore and the sale of services was Rs 7.82 crore for the Fiscal 2022. The sale of products was Rs 115.50 crore and the sale of services was Rs 6.54 crore for the Fiscal 2021. This increase was primarily due to increase in sales of medical devices and revenue from education. PAT decreased to Rs 10.71 crore for the FY 2022 from Rs 10.93 crore in FY 2022. This decrease was mainly on account of increase in depreciation and interest expenses. The company caters to the Healthcare industry as solution provider for the branding and awareness initiatives. Its idea is not only to sell a product, but to build values through its alliance with various healthcare product manufacturers. With its long standing operations and quality services, it has built a strong relationship with its customers for increasing their brand awareness. It aims to become the “first choice vendor” for all large and small pharmaceutical and medical companies which intend to procure products and services it offers for distribution as part of the branding, marketing and medical awareness initiatives.