TLDR;
This YouTube video by Sunday Investing discusses two upcoming IPOs: Modern Diagnostics and E2E Rail. The hosts share their perspectives on the companies, their financials, potential risks, and growth prospects. They also discuss the current state of the IPO market and strategies for investing in it.
- Modern Diagnostics: A diagnostic chain based in Delhi and Haryana, with steady growth but intense competition.
- E2E Rail: A railway signaling system integration company with a strong tailwind from the Kavach project, but potential risks related to working capital and RDSO approvals.
Opening Remarks [0:00]
The hosts kick off the IPO discussion, mentioning it's a quick episode covering only two companies: E2E Rail and Modern Diagnostics. They remind viewers that their opinions are not registered advice and to do their own due diligence before investing. They also highlight that IPO investing has been good this year, with easy allotment in undersubscribed IPOs leading to decent returns. Risk takers with rational analysis have generally been rewarded.
Modern Diagnostics (SME) [5:42]
Modern Diagnostics, incorporated in 1985, is a diagnostic chain offering pathology and radiology services, primarily in Delhi and Haryana. The company operates on a hub-and-spoke model with satellite centers and leased equipment. While pathology contributes the majority of revenue, they aim to increase the share of radiology due to better margins. They also have tie-ups with hospitals in African countries and Nepal for sample testing. Financials show revenue growth with improved AIDA and PAT margins. The IPO proceeds will be used for capital expenditure, working capital, and repayment of borrowings. Competition is intense in this segment, and the business is heavily reliant on the promoter family.
E to E Rail (SME) [16:52]
E2E Transportation, incorporated in 2010, provides system integration and engineering solutions for the railway sector, with 75% of its business coming from signaling projects. They are involved in the Kavach system, an automatic train protection system. The company has a subsidiary, Nova Controls, in a 50/50 JV with Tata LXC to co-develop Kavach hardware and IP. Financials show strong revenue growth until FI25, but H1 FI26 saw negative EIDA due to the nature of the business. The management expects margins to swing significantly in H2, leading to overall AIDA margins similar to last year. The IPO proceeds will primarily be used for working capital. There isn't a direct peer for this business, making valuation challenging. The real value unlocking for this business will be if and when Nova gets its approvals.
Closing Remarks [39:59]
The hosts conclude by anticipating high subscription rates for both IPOs due to limited competition. They encourage viewers to follow their channel for updates and future IPO reviews. They also mention the potential IPO of Bharat Cooking Coal, a subsidiary of Coal India, in the coming week.
