Laxmi Dental IPO Analysis 2025: Should You Subscribe?

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Laxmi Dental Ltd (LDL) launched its initial public offering (IPO) on January 13, 2025, with bidding set to close on January 15, 2025. The IPO, carrying a grey market premium (GMP) of 28%, received a solid response on the first day.

However, investors should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Laxmi Dental IPO Details

  • Issue Details: Mainstream
  • Issue Size: Rs 698.06 crore
  • Fresh Issue: Rs 138 crore
  • Offer for Sale: Rs 560.06 crore
  • Price Band: Rs 407 – Rs 428
  • Lot size: 33 shares
  • Listing Date: January 20, 2025

Laxmi Dental IPO Subscription Status

The LDL IPO kicked off with a strong response, recording an overall subscription of 5.3 times as of 5 p.m. on the opening day. Retail investors led the surge, oversubscribing their allotted shares by an impressive 12.48 times. Non-institutional investors also showed strong interest with a 10.88 times subscription, while qualified institutional buyers (QIBs) registered a 0.13 times subscription rate.

Overview of Laxmi Dental Ltd

LDL is an integrated dental products company offering a wide range of dental solutions. It operates six manufacturing facilities in India, serving clients in ~95 countries. As of September 2024, the firm employs 2,372 people and partners with more than 22,000 clinics and dentists worldwide.

LDL’s product portfolio spans three primary segments: (i) Laboratory Solutions, featuring custom-made dental prosthetics such as premium zirconia crowns, bridges, PFM crowns, and dentures; (ii) Aligner Solutions, which include aligners, retainer materials, thermoforming machines, 3D printing resins, and consumables; and (iii) Paediatric Dental Products, such as pre-formed zirconia crowns, space maintainers, fissure sealants, splints, and mineral trioxide aggregate.

Laxmi Dental Key Strengths

  • Market Leadership: LDL is the second-largest player in the domestic laboratory business and the largest export laboratory, with increasing adoption of digital dentistry. As India’s only fully vertically integrated aligner player, it controls the entire value chain, ensuring better supply chain efficiency, reduced turnaround times, and cost savings.
  • Global Presence: LDL exports its products to 95 countries and is the largest exporter of custom-made dental prostheses among Indian dental labs, catering primarily to US and UK.
  • Impressive Growth Trajectory: LDL has achieved a CAGR of 19% in operational revenue from FY22 to FY24, driven significantly by its new ventures in aligners and paediatric products. 
  • Financial Turnaround: LDL transformed its financial performance, moving from a loss of Rs 4.45 crore in FY23 to a profit of Rs 17.94 crore in FY24, further improving to Rs 18.19 crore in H1FY25.
  • Improving Margins: Gross margins expanded from 71% in FY22 to 76% in H1FY25, fuelled by an increased share of branded products (40% of sales in H1FY25 compared to 29% in FY22). Additionally, operational leverage significantly boosted EBITDA margins, growing from 4% in FY22 to 19.5% in H1FY25.

Laxmi Dental Risk Factors

  • Profitability Concerns: LDL has reported consolidated losses, negative earnings per share for FY23 and FY22, and has written off assets over the last three fiscal years. Its profitability is dependent on various factors, making it contingent on their outcomes.
  • Legal Risks: LDL, along with its subsidiaries, promoters, and directors, is involved in ongoing legal proceedings amounting to approximately Rs 41 crore. An unfavourable verdict could negatively impact business operations and financial stability.
  • Export Dependency: With exports contributing around 32.5% of revenue in H1FY25, LDL is exposed to risks associated with currency fluctuations, regulatory changes, and geopolitical uncertainties in key export markets.
  • Cash Flow Concerns: LDL has faced negative cash flows in the past. Persistent cash flow challenges could hinder its operational efficiency and long-term financial health.

Conclusion: Should You Subscribe to Laxmi Dental IPO?

LDL has established a robust network of over 22,000 dental clinics and maintains a strong global footprint, currently serving ~95 countries with plans to expand further. Following a significant turnaround in FY24, profitability is expected to improve as debt repayment will reduce interest costs.

With a P/E multiple of 84x based on FY24 earnings, the IPO appears to be fully priced. However, the grey market premium suggests a positive debut on the stock exchanges.

LDL's strategic shift toward branded products and planned capital expenditures positions the company for future growth. However, the absence of long-term contracts raises concerns about near-term growth stability. Additionally, the IPO’s Rs 560.06 crore offer for sale (OFS), comprising 80% of the total issue, is another point of concern for investors.

Considering these factors, investors with a higher risk appetite may explore the IPO for potential listing gains. Long-term investors, however, are recommended to evaluate the stock post-IPO at more reasonable valuations, as favourable industry trends provide growth opportunities.

For a deep dive into other IPOs, explore: IPO Corner on Liquide