What you must know about Docmode Health Technologies IPO?

Docmode Health Technologies Ltd was incorporated in 2017 and the company provides integrated learning solutions for healthcare professionals. The delivery of such healthcare content is done through online and offline learning models. As part of its offline learning module, Docmode Health Technologies Ltd leverages training modules like conferences and workshops. The online module also includes digital courses with the content specifically developed by the dedicated content team within the company or by specialized medical institutions and medical associations. Docmode Health Technologies Ltd also seeks the help of experts and opinion leaders in the field.

The company also offers a platform for professionals across business specializations to cross learn via panel discussions, apart from assessment tests to improve their acumen. Docmode Health Technologies Ltd offers a total of 87 certificate programs and is affiliated with over 35 medical associations and universities globally. Some of its popular service brands include Docmode LERN, Docmode SURE, Docmode KNOW, Docmode CARE, and Docmode SHOP. The company has about 66 full time employees on its rolls.

Key terms of the Docmode Health Technologies IPO

Here are some of the highlights of the Docmode Health Technologies IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 25th January 2024 and closes for subscription on 30th January 2024; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The price for the fixed price issue has been set at ₹79 per share. Being a fixed price issue, there is no question of price discovery in this issue.
   
• The IPO of Docmode Health Technologies Ltd has only a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Docmode Health Technologies Ltd will issue a total of 8,49,600 shares (8.496 lakh shares), which at the fixed IPO price of ₹79 per share aggregates to fresh fund raising of ₹6.71 crore.
   
• Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 8,49,600 shares (8.496 lakh shares) which at the fixed IPO price of ₹79 per share will aggregate to overall IPO size of ₹6.71 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 43,200 shares. Rikhav Securities Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Paulson Paul Thazhathedath and Hans Albert Lewis. The promoter holding in the company currently stands at 65.02%. However, post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted to 47.44%.
   
• The fresh issue funds will be used by the company for purchase of IT infrastructure and operating systems, and for meeting the incremental working capital needs of the company. Part of the monies raised will also go towards general corporate expenses.
   
• Fedex Securities Private Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Rikhav Securities Ltd.

IPO allocation and minimum lot size for investment

Docmode Health Technologies IPO has already announced the market maker allocation at 43,200 shares as inventory for market making. Rikhav Securities Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the HNI / NII investors. The breakdown of the overall IPO of Docmode Health Technologies Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹126,400 (1,600 x ₹79 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹252,800. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Docmode Health Technologies Ltd IPO (SME)

The SME IPO of Docmode Health Technologies Ltd IPO opens on Thursday, 25th January 2024 and closes on Tuesday, 30th January 2024. The Docmode Health Technologies Ltd IPO bid date is from 25th January 2024 at 10.00 AM to 30th January 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 30th January 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on February 01st 2024, will be visible to investors under the ISIN Code – (INE0OGG01015).

Financial highlights of Docmode Health Technologies Ltd

The table below captures the key financials of Docmode Health Technologies Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have grown more than four-fold in the last 2 years and hence the latest year revenue data would be more reliable in this case. Hence CAGR growth over two years is also very robust. Also, the PAT margins have come down to below 6% from above 7% in the last 2 years, but it remains to be seen where this ratio stabilizes.
   
• While net margins of the company have been relatively volatile and rather low for an IT training company, it looks like costs have been front-ended. However, the ROE and return on assets in the latest year are very attractive and that should hold valuations in good stead for the company.
   
• The asset turnover ratio or the sweating ratio has been above one but that really may not be the core issue in this business, with the focus being more on spreads and margins. However, with ROA attractive, lower sweating is still sustainable.

The company has latest year EPS of ₹9.13 and even through previous data may not really be comparable, the weighted average EPS of last 3 years stand at ₹6.84. Either ways, the valuations look reasonable if you consider latest year EPS at 8.6 times P/E discounting. The discounting may be slightly unfavourable on average P/E but that does not matter. What matters is that the company has a model that is scalable and it is also asset light. As long as the company maintains the quality of content, the business should be on a good growth path. Investors wanting to bet on the digital training vertical, can look at the IPO from a longer term perspective and an appreciation of higher risk levels.