Vasa Denticity coming with an IPO to raise Rs 54.07 crore

Vasa Denticity Ltd. | Trading | Miscellaneous | BSE: 0 | NSE: DENTALKART

22 May 2023 Evaluate

Vasa Denticity

Vasa Denticity is coming out with a 100% book building; initial public offering (IPO) of 4,224,000 shares of Rs 10 each in a price band Rs 121-128 per equity share.
The issue will open for subscription on May 23, 2023 and will close on May 25, 2023.
The shares will be listed on NSE Emerge Platform.
The face value of the share is Rs 10 and is priced 12.10 times of its face value on the lower side and 12.80 times on the higher side.
Book running lead manager to the issue is Hem Securities.
Compliance Officer for the issue Kriti Arora.

Profile of the company

The company operates through a centralized distribution hub located in Gurugram, India. Through its website and mobile application - ‘Dentalkart.com’, it sells a broad range of dental products including dental consumables such as adhesives, filling materials, and impression materials; dental equipment such as chairs, x-ray machines, and autoclaves; and dental instruments such as forceps, probes, and mirrors. Apart from third party brands, it also market and sell under its own private label portfolio of cost-effective, high-quality dental products in the areas of orthodontics, endodontics and oral surgery such as Metal Bracket Kit, EDTA (Ethylenediaminetetraacetic acid), dental instrument etc. The breadth and depth of its products offerings address majority of the dentists’ clinical needs for dental materials.

It also has a portfolio of many owned brands, which are manufactured/procured from third parties based on the specifications built by it through its dedicated research and development team. For sourced products, it has dedicated team to undertake inspection and ensure that such products are built to suit its specifications in terms of design and quality. Its owned brands are available on its online channels, as well as at third party platforms such as Amazon, GeM and Flipkart. It also provides after sales service in relation to its products. It is accomplished to deliver the products across India and overseas to countries such as Malaysia, United Arab Emirates, Saudi Arabia, Australia, Kuwait, USA etc. with the help of its dedicated fulfillment center in Gurugram and third-party logistics services.

Proceed is being used for:

Meeting working capital requirement
Expenditure to enhance visibility and awareness of its brands
General corporate purpose
Public offer expenses

Industry overview

The Indian dental industry consists mainly of independent clinics operated by individual dentists. However, there has been a recent emergence of dental specialty chains in major cities of India, which are often supported by venture capital or private equity funding. These chains have contributed significantly to the growth of the industry by promoting the use of advanced, high-quality tools, fittings, and equipment. Indian companies primarily focus on the production of clinical disposables, instruments, disinfectant tools, sterilizing equipment, impression materials, and temporary materials for tooth filling.

The high-end segment of the market, such as dental implants, fittings, and prosthetics, is mainly dominated by foreign players with local presence in India, although many Indian companies also manufacture under license for foreign manufacturers while simultaneously engaging in trade and importing activities. Currently, there are around 5,000 dental laboratories and 300 dental institutes providing basic and advanced oral health care. As the number of dental chains increases, the organized dental clinics' share is expected to grow across the country.

The India Dental Industry Market is highly competitive, with the presence of several global and Indian manufacturers offering a diverse range of indirect restorative materials, direct restorative materials and dental biomaterials. Prominent players are vigorously collaborating and developing new products with the other companies to consolidate their market positions around the world. The India Dental Industry Market is highly competitive, with the presence of distributors/online platform offering a diverse range of indirect restorative materials, direct restorative materials and dental biomaterials. Prominent distributors are offering new dental material products to consolidate their market positions around in the India Dental Industry Market.

Pros and strengths

Digital-first Omni channel distribution: Its online network allows it to be present across various touchpoints and serve its customers wherever they shop. In the F.Y. 2021-22, it has served over 2 lakh orders placed by over 61,000 customers on its website, mobile application and directly. These orders have been placed from all the 28 states and 6 Union Territories of India. Its diverse customer base helps it limit its dependency on a specific customer segment or geography thereby reducing financial and concentration risk.

A one stop shop for dental products: Over the years, it has created an extensive portfolio of over 10,000 SKU’s dental materials for diagnosing, treating and preventing dental issue and parts ranging from Consumable items such as filling materials, and impression materials; dental equipment such as chairs, x-ray machines, and autoclaves; and dental instruments such as forceps, probes, and mirrors and various other consumables, Instruments and equipment’s. its portfolio includes over 300 brands including international brands such as Mani, 3M, Dentsply, Ivoclar, Woodpecker etc as well as non-branded products.

Efficient distribution network: It distributes its products from its centralized distribution network. It strives to maintain optimal inventory levels in order to satisfy customer demand for prompt delivery and complete order fulfillment. These inventory levels are managed on a daily basis with the aid of its ERP systems. Once an order is entered, it is electronically transmitted to the distribution center nearest the customer’s location for order fulfillment. Further, in June 2022, it has rented a warehouse in Bengaluru which it expect, will reduce the delivery time and transportation cost of the product especially southern part of India.

Risks and concerns

Depend on third party service provider: Its ability to meet its customers’ expedited delivery expectations is an integral component of its business strategy for which its customers rely. Shipping is a significant expense in the operation of its business. It ships almost all of its orders through third-party delivery services, and typically bear the cost of shipment. Accordingly, any significant increase in shipping rates could have a material adverse effect on its business, financial condition or operating results. Similarly, strikes or other service interruptions by those shippers, including at transportation centers or shipping ports, could cause its operating expenses to rise and materially adversely affect its ability to deliver products on a timely basis. The third-party logistics service provider that it rely on may also subject it to additional risks. For example, traffic accidents caused by such couriers in performing their services on its behalf may cause negative publicity in the local community and may negatively affect its brand image and reputation.

Highly competitive market: The Indian dental care market is highly competitive with the presence of both domestic and international players. Some of the leading players in the market include 3M, Dentsply Sirona, Prevest Denpro, Danaher Corporation etc. These companies are focusing on innovation and product development to maintain their market position. Its competitors include a number of online marketplaces, such as Pink Blue Supply Solutions, Dentalmart E-Commerce etc, offline retail stores, and brands that take a direct-to-customer approach, effectively removing it from the distribution and sales process. The internet and mobile networks provide new, rapidly evolving and competitive channels for the sale of all types of goods and services. Customers who purchase goods and services through it has other alternatives, and sellers have other channels to reach customers. It expects competition to continue to intensify.

Geographical concentration: Its business is dependent upon its ability to manage its warehouse facility located at Gurugram, which are subject to various operating risks, including those beyond its control, such as the industrial accidents and severe weather conditions and natural disasters. Any significant malfunction may entail significant repair and maintenance costs and cause delays in its operations. Such disruptions could result in the damage or destruction of a significant portion of its warehousing abilities, significant delays in the transport of its products, loss of key managerial personnel, and/or otherwise adversely affect its business, financial condition and results of operations.

Outlook

The company is in the business of marketing and distribution of a comprehensive portfolio of dental products including consumables, instruments, equipment, and accessories for diagnosing, treating and preventing dental conditions as well as improving the aesthetics of the human smile through its online portal ‘Dentalkart.com’. On the concern side, the Indian dental care market is highly competitive with the presence of both domestic and international players. Some of the leading players in the market include 3M, Dentsply Sirona, Prevest Denpro, Danaher Corporation etc. Moreover, the third-party logistics service provider that it rely on may also subject it to additional risks. For example, traffic accidents caused by such couriers in performing their services on its behalf may cause negative publicity in the local community and may negatively affect its brand image and reputation.

The company is coming out with an IPO of 4,224,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 121-128 per equity share. The aggregate size of the offer is around Rs 51.11 crore to Rs 54.07 crore based on lower and upper price band respectively. On performance front, during the financial year 2021-22 the net revenue from operation of company increased to Rs 7692.05 lakh as against Rs 4007.08 lakh in the Financial Year 2020-21 representing an increase of 91.96%, The increase was primarily due to an increase in demand for its products, increase SKU’s and increase in number of orders which results of increasing in its revenue from operation. The company reported Restated profit after tax for the financial year 2021-22 of Rs 540.98 lakh in comparison to Rs 32.58 lakh. The increase of 1560.47% which was majorly due to Increase in the sale of owned brand products which has higher margins. Further, the company had improved its operational efficiency through cost-cutting measures, process improvements, or automation. This had resulted in reduced costs and higher profits.

Going forward, the company’s objective is to continue to expand as a global value-added provider of dental care products to dental and medical practitioners by increasing their efficiency and success. To accomplish this, it apply its competitive strengths in executing the following strategies: Invest in its owned brand portfolio, continue to acquire new customer and increase customer loyalty and continue to grow platform by offering new products and services.