Laxmi Dental Ltd. IPO: Key Details

Laxmi Dental

• Laxmi Dental is coming out with a 100% book building; initial public offering (IPO) of 1,64,76,130 shares of Rs 2 each in a price band Rs 407-428 per equity share.
• Not more than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
• The issue will open for subscription on January 13, 2025 and will close on January 15, 2025.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 203.50 times of its face value on the lower side and 214.00 times on the higher side.
• Book running lead managers to the issue are Nuvama Wealth Management, Motilal Oswal Investment Advisors and SBI Capital Markets.
• Compliance Officer for the issue is Nupur Joshi.

Profile of the company

Offering a comprehensive portfolio of dental products, Laxmi Dental is India’s only end-to-end integrated dental products company as at September, 2024. The company’s offerings include custom- made crowns and bridges, branded dental products such as clear aligners, thermoforming sheets and aligner related products as a part of aligner solutions, and paediatric dental products. It had a presence of more than 20 years, based on revenue for Fiscal 2024, it is amongst the top two largest Indian dental laboratories. Based on the revenue from operations and PAT Margin for Fiscal 2023 and the product offered, it is the largest and most profitable vertically integrated and indigenous B2B2C dental aligner solutions company. The company manufactures its dental products across its six manufacturing facilities spread across 147,029.63 square feet.

Primary dental products offered by the company’s laboratory include custom made dental prosthesis such as metal free crowns and bridges, including its range of branded premium zirconia crowns and bridges “Illusion Zirconia”, porcelain fused to metal (PFM) crowns, bridges, and dentures. Metal-free products contributed to 53.70% of the total revenue from its dental laboratory business catering to the Indian market and to 36.31% of total revenue from its dental laboratory business catering to international markets respectively in Fiscal 2024. The company has launched iScanPro on August 9, 2024, branded intraoral scanners for digital dentistry, currently being employed by 264 dentists. Dental restoration units prepared using digital impression constituted 48.61%, by volume, of the total units sold by its domestic laboratory business and constituted 55.48%, by volume, of the total units sold by its international laboratory business in Fiscal 2024.

Furthermore, the company has a more focussed approach towards capturing the Indian aligner market share and it launched clear aligners under its brand Illusion Aligners which is the first Indian brand to receive 510(k) clearance from US FDA in 2021 to market clear aligners. It has adopted B2B2C business model for sale of its customised clear aligner solutions while offering a flexible ‘pay as you go’ model along with the upfront payment model, making its aligners more affordable to the end customers. Adoption of a B2B2C model involves sale of clear aligners through its Dental Network who in turn offer its dental products to end customers, which has helped it to grow rapidly owing to its already established Dental Network with reach of over 22,000 dental clinics, dental companies and dentists between Fiscals 2022 to September 30, 2024. 

Proceed is being used for:

• Repayment/prepayment, in full or in part, of certain outstanding borrowings availed by the company
• Investment in certain Subsidiaries for the repayment/prepayment, in full or in part, of certain outstanding borrowings
• Funding the capital expenditure requirements for purchase of new machinery for the company
• Investment in its subsidiary, Bizdent Devices Private Limited, for the capital expenditure requirements for the purchase of new machinery
• General corporate purposes

Industry Overview

Healthcare has been an underpenetrated segment historically but with rising levels of disposable income in comparison to peers and heightened post-pandemic awareness of superior health management, focus on healthcare is growing, leading to increased discretionary spending on the segment. Indian Healthcare industry is segmented into Hospitals, Pharmaceuticals, Diagnostics, Medical equipment supplies, medical insurance, and Telemedicine. The estimated market size of the Indian Healthcare industry is $352 billion in 2022, and it is estimated to grow at CAGR of 22.0%. The industry is expanding due to the country's rapid economic growth, middle-class income gains, and health insurance carriers' expanded market penetration. Furthermore, there has been a nationwide surge in government healthcare spending due to shifting demographics and a move from chronic to lifestyle disorders. The Indian Healthcare Market is expected to reach $636 billion by 2025.

The Indian Healthcare market is dominated by Hospital segment with about 74% share ($260.4 billion, 2022), followed by Pharmaceutical with about 11.6% Share ($40.9 billion, 2022), Medical Devices with about 4.4% share ($15.4 billion, 2022), and Diagnostics with about 2.6% share ($9 billion, 2022).20 Among the Healthcare segments, the Medical Device segment is expected to grow fast between 2022 and 2030 with a CAGR of about 20.4%, followed by Hospitals (18.2%), Diagnostics (13.0%) and Pharmaceuticals (12.2%). The Indian Medical Device market is estimated to reach $50.0 billion by 2030 at a growth rate of 20.4% from its estimated value of $15.4 billion in 2022.22 It is estimated to contribute 1.65% of the global medical device market. Export of medical devices from India increased from $2.29 billion in 2020 to $3.40 billion in 2022. The Indian medical device exports are projected to reach $18 billion in 2030.

India's dental care services market is estimated to be $3.4 billion in 2023 and expected to grow at a rate of 12.6% to reach $7.8 billion in 2030. The growth of the market is being driven by increasing prevalence of Oral Health disorders such as Dental Caries, Malocclusion and Periodontal diseases among the population, and greater demand for general and specialized dental care due to growing awareness. While independent dental clinics run by individual practitioners make up most of the Indian dentistry market, there is growing number of dental chains in metropolitan and Tier I cities29 due to improved affordability for dental care, increase in awareness and favorable financing environment to establish network clinics. Moreover, the Global dental consumables market, in terms of retail sales revenue, is expected to grow from $177.4 billion in 2023 to $356.8 billion in 2030 at CAGR of 10.5% and the emerging countries such as India and China are expected to witness higher growth compared to developed countries. The global dental consumables market is expected to grow higher than the global dental services market (10.5% vs 7.5%) in the forecast period due to growing number of branded premium products, and increased awareness and adoption of dental products such as Clear Aligners and dental crowns in emerging economies such as China, India and Brazil.

Pros and strengths

The only integrated dental products company in India, well-positioned to capture industry tailwinds: The company’s portfolio includes custom-made crowns and bridges, branded dental products such as clear aligners, thermoforming sheets and aligner related products as a part of aligner solutions and paediatric dental products. The company is among one of the few vertically integrated players globally which have a backward integrated (i.e. manufacturing the raw materials to designing of dental products) and forward integrated (that is offering solutions for treatment planning) business model. The company’s vertically integrated approach contributes significantly to its competitive edge by having direct control over sourcing raw material. Thus, it is at a position to ensure consistency, and quality in its production process with its end-to-end capabilities from raw material to distribution. As on September 30, 2024, the company’s Dental Network has a reach of over 22,000 dental clinics, dental companies and dentists between Fiscals 2022 to September 30, 2024. The company’s presence across the value chain of dental products it to benefit from cross-selling opportunities and increases wallet share from the existing Dental Network, which positions it well to capture the increased potential of the growing market opportunities across segments.

Vertically integrated diverse branded product portfolio: Owing to its presence of over 20 years and its Dental Network, the company has been able to build a brand for itself and expand its offerings from custom-made crowns and bridges to branded consumer dental products including clear aligners and paediatric dental products. It has been engaging in efforts to establish “Illusion” as a well-recognized brand which along with its established market presence and experience in manufacturing quality products will help it to build and scale brands in the Indian dental consumables market. The company has strategically selected and on-boarded national brand ambassadors to build awareness and customer connect. Due to its experience of more than two decades in the dental industry and its high-quality dental products, the company has been able to scale its branded product portfolio.

Large Dental Network providing it with competitive advantage in the market: With market presence of more than 20 years, reinforced by a large Dental Network with a reach of over 22,000 dental clinics, dental companies and dentists over the six-month period ended September 30, 2024 and last three Fiscals and have catered to global and domestic demand by exporting its dental products to more than 95 countries and selling across 320 cities in India between Fiscals 2022 to September 30, 2024. The company continues to engage and deepen its relationship with its Dental Network through hands-on workshops, in-clinic branding, key opinion leader tie-ups, and product trainings. A strong network among dental clinics, dental companies and dentists acts as a strong moat and barrier to entry for new entrants in the Indian dental products market.

Robust technologically advanced capabilities: The company employs advanced technological equipment and machinery such as iScanPro, branded intraoral scanners launched for its Dentist Network to optimize workflow. Digital impressions obtained with iScanPro, and intraoral scanners are instantly transmitted to its dental laboratory which eliminates the logistics cost and streamlines the production process for dental restorations. This streamlined communication between dental practitioners and technicians leads to quicker turnaround times and improved profitability owing to operational efficiencies. The company’s operations involve use of milling machines, which include wet and dry milling for metal and metal-free restorations respectively, and 3D printing machines, for which it has a range of printers with various build sizes.

Risks and concerns

All its major manufacturing facilities are situated in and around Mumbai: A significant portion of its revenue was generated by sales of dental products, with five out of six key manufacturing facilities located in and around the Mumbai Metropolitan Region. The continued operation of the company’s manufacturing facilities can be substantially interrupted due to a number of factors, many of which are outside of its control, including fire, flood, earthquakes, power outages, fuel shortages, mechanical breakdowns, terrorist attacks and wars, or other natural disasters, as well as loss of licenses, certifications and permits, changes in governmental planning for the land underlying these facilities and regulatory changes. If its manufacturing facilities are rendered unusable as a result of natural disasters, unanticipated catastrophic events or any other reason, its business, financial condition and results of operations may be adversely affected. It may not be able to source or locate for alternative manufacturing facilities that meet the requirements of modern manufacturing operations for guaranteed storage safety, optimal and flexible space utilization and high operational efficiency are in short supply.

Business is concentrated in certain jurisdictions, globally and domestically: The company’s business is spread across various cities and towns in multiple states in India, while its international business is concentrated in the U.S. and the UK. However, a significant portion of its revenue is generated within India and from U.S. and the UK. This regional concentration exposes it to risks such as economic slowdowns, social or political unrest, natural calamities, or adverse government policies in these regions. Any negative developments in these regions could have an adverse effect on its business, operations and financial performance.

The business depends heavily on its reputation and perception of its brands: The company’s reputation and perception of its brands are critical to its business. The company’s Dental Network expects it to maintain high quality standards. The company’s branded products contribute to a large portion of its revenues Maintaining and enhancing its reputation, quality standards and brand recognition depends primarily on the quality and consistency of its dental products, as well as the success of its brand promotion efforts. The company has expended considerable efforts promoting its brands and the quality of its dental products, and it expects to continue to do so. The company’s brand promotion efforts, including celebrity collaborations, in-clinic advertisements, print media advertisements, webinars, roadshows and social media marketing may incur significant expenses and may fail to effectively promote its brands, generate additional sales or grow its Dental Network. If the company is unable to maintain and further enhance its brand recognition, its ability to retain and expand its Dental Network may be impeded and its business prospects may be materially and adversely affected.

Stiff competition from domestic as well as multinational companies: The company faces competition from global and Indian dental lab companies, global and Indian dental product companies. It generally competes based on the range of products offered, ability to customise products, brand recognition, dental network, turnaround time, fees and customer service. The company’s comprehensive dental products portfolio, B2B2C business model, the quality of its products, technologically advanced infrastructure, and customer experience, are important differentiating factors in its Dental Network choosing it as their preferred partner, which helps it in retaining them, and sets it apart from its competitors. Some of its competitors may be able to provide dental products that are of a higher quality or are more competitively priced. Some competitors may have greater financial, research and development, manufacturing, and marketing resources than it has. Increase in such competition could increase pressure on it to reduce the selling prices of its dental products or require it to increase its sales and marketing efforts.

Outlook

Laxmi Dental is an integrated dental products company. The company offers custom crowns and bridges, branded dental items like clear aligners and thermoforming sheets, aligner-related products as part of its aligner solutions, and pediatric dental products. Their product portfolio includes custom crowns and bridges, clear aligners, thermoforming sheets, pediatric dental products, and more. The only integrated dental products company in India, well-positioned to capture industry tailwinds. Also, it is the second largest player in domestic laboratory business and largest export laboratory with increasing adoption of digital dentistry. On the concern side, the company’s business is concentrated in certain jurisdictions, globally and domestically, and any loss of business in such regions could have an adverse effect on its business, results of operations and financial condition. Moreover, all its major manufacturing facilities are situated in and around Mumbai and any disruptions in the region could have a material and adverse effect on its business, financial condition and results of operations.

The company is coming out with a maiden IPO of 1,64,76,130 equity shares of Rs 2 each. The issue has been offered in a price band of Rs 407-428 per equity share. The aggregate size of the offer is around Rs 670.58 crore to Rs 705.18 crore based on lower and upper price band respectively. On performance front, the company’s revenue from operations increased by 19.75% to Rs 1,935.55 million for the Financial Year 2024 from Rs 1,616.31 million for the Financial Year 2023 primarily due to increase in revenue from sales of its branded dental products and laboratory offerings. The company’s restated profit for the year increased to Rs 252.29 million for the Financial Year 2024 as compared to a loss of Rs 41.63 million for the Financial Year 2023. The restated profit of the year for the Financial Year 2024 also took into account of share of profit of Jointly Controlled Entity of Rs 88.88 million, from Rs 6.02 million for the Financial Year 2023.

The company had a presence of more than 20 years. It has a large Dental Network with a reach of over 22,000 dental clinics, dental companies and dentists over the six-month period ended September 30, 2024 and last three Fiscals and have catered to global and domestic demand by exporting its dental products to more than 95 countries and selling to over 320 cities in India between Fiscals 2022 to September 30, 2024 and it has the potential to expand to the other regions. Going forward, the company intends to grow its Dental Network by continuing to invest in sales and marketing activities for deeper penetration, engaging sales executives for promotion of digital technologies, targeted investments such as product improvements, technological innovations, advertising, and regular training of its Dental Network. It may engage additional qualified distributors with considerable experience in sales channels, especially in underpenetrated regions globally.