Medistep Health NSE SME IPO review (Not Rated)

•    The company is engaged in trading and manufacturing of pharma/healthcare products.
•    It posted growth in its top and bottom lines for the reported periods.
•    Quantum jump in bottom lines from FY24 raise eyebrows and concern over its sustainability, as it is operating in a highly competitive and fragmented segment.
•    Based on recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for medium term.

ABOUT COMPANY:
Medistep Healthcare Ltd. (MHL) is a Pharmaceutical Company that has carved a niche in the Healthcare Industry through its in manufacturing Sanitary pads, Energy powder and trading a diverse range of pharmaceutical products, Nutraceutical products, Intimate Products and surgical products through distribution network. 

The company operates in the pharmaceutical industry and is involved in the business of trading of pharmaceutical products, intimate care and hygiene products, surgical products & nutraceutical products and manufacturing of intimate and nutraceutical products. On January 2024, the company started the manufacturing of intimate product (sanitary pads) and nutraceutical product (Energy powder). As of July 20, 2025, it had 9 employees on its payroll. Additionally, it engages contract workers as and when needed.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 3744000 equity shares of Rs. 10 each at a fixed price of Rs. 43 per share to mobilize Rs. 16.10 cr. The issue opens for subscription on August 08, 2025, and will close on August 12, 2025. The minimum number of shares to be applied is for 6000 shares and in multiples of 3000 shares, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.35% of the post-IPO paid-up capital of the company. The company is spending Rs. 1.61 cr. for this IPO process, and from the net proceeds of the IPO, it will utilize Rs. 5.08 cr. for capex on purchase of new plant and machinery, Rs. 12.34 cr. for working capital, and Rs. 1.64, cr. for general corporate purposes. 

The IPO is solely lead managed by Fast Track Finsec Pvt. Ltd., and Cameo Corporate Services Ltd., is the registrar to the issue. Nirman Share Brokers Pvt. Ltd. is a market maker. 

The company has issued initial equity shares at par value. It has issued/converted further equity shares in the price range of Rs. 15 – Rs. 25 per share between March 2024, and June 2024. It has also issued bonus equity shares in the ratio of 1 for 1 in April 2024. The average cost of acquisition of shares by the promoters is Rs. 8.37, and Rs. 12.50 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 10.47 cr. will stand enhanced to Rs. 14.21 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 61.10 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 27.74 cr. / Rs. 0.92 cr. (FY23), Rs. 39.08 cr. / Rs. 3.33 cr. (two broken periods of FY24), Rs. 49.66 cr. / Rs. 4.14 cr. (FY25).

For the last three fiscals, the company has reported an average EPS of Rs. 9.33 and an average RoNW of 36.11%. The issue is priced at a P/BV of 2.64 based on its NAV of Rs. 16.28 as of March 31, 2025, and at a P/BV of 1.86 based on its post-IPO NAV of Rs. 23.18 per share.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 14.73. Based on FY24 earnings, the P/E stands at 18.38. Thus, the issue appears fully priced.

For the reported periods, the company has posted PAT margins of 3.33% (FY23), 5.55% (FY24 – up to 02.07.23), 9.22% (from 03.07.23 to 31.03.24 - FY24), 8.35%, (FY25), and RoCE margins of 109.62%, 40.00%, 59.10%, 38.91%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Achyut Healthcare, Fabino Enterprises, as their listed peer. They are trading at a P/E of 189.0, and 91.0 (as of August 07, 2025). However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 9th mandate from Fast Track Finsec in the last three fiscals including the ongoing one.  Out of the last 8 listings, 3 opened at discount, and the rest with premium ranging from 0.14% to 216.08% on the date of listing.