Laxmi Dental Ltd - IPO Note
Hospital & Healthcare Services
Laxmi Dental Ltd - IPO Note
Hospital & Healthcare Services
Stock Info
Shareholding (Pre IPO)
Shareholding (Post IPO)
Company Description
Laxmi Dental Ltd. (LDL) is offering a comprehensive portfolio of dental products and is India’s only end-to-end integrated dental products company as of September, 2024. Its 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 pediatric dental products. It had a presence of more than 20 years and 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. It manufactures dental products across its six manufacturing facilities spread across 147,029.63 square feet.
Laboratory offerings:
The Indian dental laboratories market is characterized by the presence of fragmented
and unorganized dental laboratories with less than ten technicians and a dearth
of quality management standard compliant dental products. Changing regulatory requirements
in the medical devices sector is expected to transition the fragmented and unorganized
dental products and consumables market to organized and consolidated market dominated
by companies focusing on quality, operational efficiency, and consumer experience.
In terms of export revenue for the Fiscal 2023 among the Indian dental labs, it
is the largest exporter for custom made dental prosthesis, catering primarily to
US and UK. Having evolved from a dental laboratory with a few members to an integrated
dental products company, it now has a presence of 20 years in the dental laboratories
business with a reach of over 22,000 dental clinics, dental companies and dentists
between Fiscals 2022 to September 30, 2024 (“Dental Network”).
Primary dental products offered by its laboratory include custom made dental prosthesis such as metal free crowns and bridges, including 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 dental laboratory business catering to international markets respectively in Fiscal 2024. It 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 domestic laboratory business and constituted 55.48%, by volume, of the total units sold by international laboratory business in Fiscal 2024.
Aligner Solutions:
LDL has a more focused 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.
The company has adopted B2B2C business model for sale of customized clear aligner
solutions while offering a flexible ‘pay as you go’ model along with
the upfront payment model, making aligners more affordable to the end customers.
Adoption of a B2B2C model involves sale of clear aligners through Dental Network
who in turn offer dental products to end customers, which has helped it 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.
LDL is the only aligner company in India which is fully vertically integrated having end-to-end capabilities from raw material to distribution, enabling significant control on the supply chain. They are one of the very few companies in India to manufacture and supply thermoforming sheets, thermoforming machines, dental consumables, biocompatible resins for 3D printing under our brand ‘Taglus’ tailored for manufacturing of clear aligners.
Paediatric dental products:
LDL entered the paediatric dental market through Jointly Controlled Entity Kids-E-Dental
LLP by acquiring a 60% stake in 2021. In terms of revenue from operations as of
March 31, 2024, they are one of the leading paediatric dental product brands in
India. Kids-E-Dental LLP is the only Indian company specialized in paediatric dental
products and manufacturing of pre-formed metal free paediatric dental crowns. It
offers a comprehensive range of paediatric products, including pre-formed branded
paediatric crowns, Silver Diamide Fluoride (“SDF”),
space maintainers, fissure sealant, reinforced splint and mineral trioxide aggregate.
We are the only Indian manufacturer of US FDA cleared SDF.
Competitive 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. Primary dental products
offered by the laboratory are focused on custom made dental prosthesis such as metal
free crowns and bridges, including range of branded premium crowns under “Illusion
Zirconia”, porcelain fused to metal (“PFM”) crowns,
bridges, and dentures. LDL have also launched iScanPro, branded intraoral scanners
for digital dentistry. More than 160 intraoral scanners were deployed by Company
in Indian market to promote digital dentistry.
In 2021, the company launched clear aligners under brand Illusion Aligners, and also offer aligner and retainer material, thermoforming sheets, biocompatible 3D printing resins, thermoforming machines and consumables under brand ‘Taglus’ which are used for manufacturing clear aligners. This vertical integration also gives them an advantage as they are able to offer clear aligners at affordable prices due to in-house cost-effective manufacturing. Kids-E-Dental offers a comprehensive range of paediatric products, including pre-formed branded paediatric crowns, silver diamide fluoride (“SDF”), space maintainers, fissure sealant, reinforced splint and mineral trioxide aggregate. It is among one of the few vertically integrated players globally which have a backward integration (i.e. manufacturing the raw materials to designing of dental products) and forward integrated (that is offering solutions for treatment planning) business model. Their vertically integrated approach contributes significantly to competitive edge by having direct control over sourcing raw material.
As on September 30, 2024, their dental network has a reach of over 22,000 dental clinics, dental companies and dentists between Fiscals 2022 to September 30, 2024. Their presence across the value chain of dental products benefits from cross-selling opportunities and increases wallet share from the existing Dental Network, which positions them well to capture the increased potential of the growing market opportunities across segments.
Second largest player in domestic laboratory business and largest export laboratory
with increasing adoption of digital dentistry:
Their laboratory has a presence of more than 20 years in the dental laboratories
business and has evolved from a dental laboratory with a few members to an integrated
dental products company. Their laboratory offers custom-made dental prostheses such
as metal-free crowns and bridges, including their range of premium crowns under
“Illusion Zirconia”, PFM crowns, bridges, and dentures. Further, its
Dental Network has a reach of more than 22,000 dental clinics, dental companies
and dentists and they have catered to over 320 citiesnationally between Fiscals
2022 to September 30, 2024.Technologies such as intraoral scanners have enabled
dentists to tailor the treatment to each patient’s unique needs, improve accuracy,
optimize treatment planning, predict outcomes accurately, and reduce productiontime
and costs making dental restorations accessible to a broader range of patients and
these factors lead to increase in operating profitability.Dental restoration units
prepared using digital impressions by their domestic laboratory business constituted
62.43%, 48.61%, 36.36%, and 28.11% and by their international laboratory business
constituted 61.78%, 55.48%, 27.94%, and 12.37% in the six months ended September
30, 2024, and Fiscals 2024, 2023, and 2022 respectively depicting annual growth.
Vertically integrated diverse branded product portfolio:
Owing to their presence of over 20 years and their Dental Network, the company believes
they have been able to build a brand for themselves and expand their offerings from
custom-made crowns and bridges to branded consumer dental products including clear
aligners and paediatric dental products.They have been engaging in efforts to establish
302 “Illusion” as a well-recognized brand along with their established
market presence and experience in manufacturing quality products will help them
to build and scale brands in the Indian dental consumables market.They have strategically
selected and onboarded national brand ambassadors to build awareness and customer
connections. Due to their experience of more than two decades in the dental industry
and their high-quality dental products, they have been able to scale their branded
product portfolio.
It also offers thermoforming sheets, biocompatible 3D printing resins, thermoforming machines and consumables under brand ‘Taglus’ which are used for manufacturing clear aligners. It benefits from the first mover advantage by being one of the very few companies in India to manufacture and supply thermoforming sheets, thermoforming machines, dental consumables, biocompatible resins for 3D printing tailored for manufacturing of clear aligners.With the in-house production of raw materials and manufacturing equipment, and automating the production lines it operates at scale, improving production efficiency delivering faster turnaround time and minimizing errors.
Large Dental Network providing them 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 dental products to more than 95 countries
and selling across 320 cities in India between Fiscals 2022 to September 30, 2024.
It continues to engage and deepen relationship with 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.
LDL have adopted B2B2C business model for sale of clear aligners, which means that dental products are sold through the Dental Network to the end consumer patient, lending credibility to dental products since they are being recommended by Dental Network.Adoption of B2B2C model also lowers marketing expenses since it already has a pool of large Dental Network and serves as a significant economic advantage as this business model requires strong relationship with Dental Network which have been built by the company given extensive experience in the dental laboratories business.
The B2B2C model has also helped them in gaining a larger wallet share from Dental Network as they are able to offer a comprehensive portfolio of product offerings which 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 to existing Dental Network. We believe that affordable pricing along with high quality of dental products has enabled the company to tap into the large underpenetrated clear aligners market.
Robust technologically advanced capabilities with stringent regulatory compliance
ensuring high quality standards:
As of September 30, 2024, they have six manufacturing facilities, three of which
are located in Mira Road, Mumbai Metropolitan Region, Maharashtra, two in Boisar,
Mumbai Metropolitan Region, Maharashtra, and one in Kochi, Kerala, and further five
supporting facilities two of which are located in Mumbai, and one each in Delhi,
Bengaluru, and Ahmedabad with manufacturing capabilities.
For instance, they have three manufacturing units at Mira Road with a total built up area of 57,244.4 square feet and two manufacturing units in Boisar with a total built up area of 84,606.2 square feet, for production of dental products under laboratory, aligners solutions and paediatric divisions including clear aligners under “Illusion Aligners” brand, and aligner sheets and thermoforming machines under brand “Taglus”.
It employs advanced technological equipment and machinery such as iScanPro, branded intraoral scanners launched for Dentist Network to optimize workflow. Digital impressions obtained with iScanPro, and intraoral scanners are instantly transmitted to 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.
Peer Comparison
| Name of the company (FY24) | Revenue (Rs. in cr) | ROE (%) | ROCE (%) | P/E (x) |
|---|---|---|---|---|
| Laxmi Dental Ltd | 194.00 | 78.78% | 19.97% | 89x |
| Poly Medicure Ltd | 1376.00 | 19.06 | 26.17% | 97x |
Key Risks & Concerns
Risk of pricing pressure: Due to lack of long-term purchase orders or commitments from Dental Network it increases the risk of pricing pressure from Dental Network which may have an adverse effect on their business, operations and financial condition.
Intense competition: The Company faces competition from domestic as well as multinational companies and inability to compete effectively may have an adverse effect on their business, operations and financial condition.
Exchange rate fluctuations: The Company’s business is subject to a significant risk from exchange rate fluctuations. If it fail to manage foreign currency risk, their business, results of operations and financial condition may be materially and adversely affected.
Outlook and Valuation
Laxmi Dental Ltd. (LDL) is offering a comprehensive portfolio of dental products and is India’s only end-to-end integrated dental products company as of September, 2024. Its 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 pediatric dental products. The company ranks as the second-largest global dental laboratory with 20 years of expertise and a robust network of 22,000 dental professionals, positioning it firmly in the global market. With operations in 320 Indian cities and exports to 95 countries, it has a substantial global footprint poised for expansion. Accredited by the USFDA, the company adheres to stringent global quality standards, boosting its credibility, especially in international markets. The industry shift from a "push" to a "pull" market, driven by technological advancements and increased dental health awareness, presents growth opportunities for high-quality products.
Illusion Aligners priced 30-40% lower than competitors like Invisalign, provide a competitive edge while maintaining superior quality. The proprietary Taglus brand ensures backward integration, improving cost efficiency. Faster production turnaround times enhance customer satisfaction, establishing the company as a leader in speed and reliability. With 20% of dental scans being digital (industry average is 6%), the company leverages automation and digitization for operational efficiency and superior customer service. The China+1 strategy, with 35% of U.S. dental lab work outsourced to India, offers significant growth potential in the U.S. market. A recent partnership with a major dental network expands the company's reach and market penetration.With 65% of revenue from domestic markets and 35% from exports, the company is poised for balanced growth, particularly in India, where it currently serves only 10% of the 300,000 dentists. Scalable infrastructure with six manufacturing plants and efficient digital processes positions the company for long-term success, leveraging low per capita dental expenditure in India and rising awareness for growth. The diversified product portfolio, robust professional network, and digital adoption position the company for sustained domestic and international growth. There is a notable reliance on working capital and significant import dependence, with 43 percent of the raw material mix being sourced from abroad. Furthermore, the three-year cumulative operating cash flow to EBITDA ratio is alarmingly low at 31 percent, likely due to the high demands of working capital. On valuation front, the issue is priced/valued at 89x based on FY24 earnings at the upper end of the price band, which is expensive in our view. High risk appetite investors can SUBSCRIBE to the issue for the long term.
Key Information
Use of Proceeds:
The total issue size is Rs.698.06 cr, which comprises of a free issue of Rs.138
cr and an Offer for Sale worth Rs.560.06 cr. From the net proceeds of the issue,
the company will utilize Rs.22.98 cr towards Repayment/prepayment, in full or in
part, of certain outstanding borrowings availed by Company, Investment in certain
Subsidiaries for the repayment/prepayment, in full or in part, of certain outstanding
borrowings (Rs.4.6 cr), Funding the capital expenditure requirements for purchase
of new machinery for the Company (Rs.43.50 cr), Investment in Subsidiary, Bizdent
Devices Private Limited, for the capital expenditure requirements for the purchase
of new machinery (Rs.25 cr) and rest (Rs.41.92 cr) for general corporate purposes.
Book running lead managers:
Nuvama Wealth Management Ltd, Motilal Oswal Investment Advisors Ltd, SBI Capital
Markets Ltd
Management:
Rajesh Vrajlal Khakhar (Chairperson and Whole-Time Director), Sameer Kamlesh Merchant
(Managing Director and Chief Executive Officer), Sumona Chakraborty (Non-Executive,
Non-Independent (Nominee) Director), Rajesh Shashikant Dalal (Non-Executive, Independent
Director), Anjana Rajendra Grewal (Non-Executive, Independent Director), Devesh
Ghanshyam Chawla (Non-Executive, Independent Director), Dharmesh Bhupendra Dattani
(Chief Financial Officer).
Financial Statement
Profit & Loss Statement:- (Consolidated)
| Particulars (Rs. In cr) | FY22 | FY23 | FY24 | H1FY25 |
|---|---|---|---|---|
| Revenue from operations | 137.00 | 162.00 | 194.00 | 117.00 |
| Other Income | 1.00 | 2.00 | 2.00 | 1.00 |
| Total Income | 138.00 | 164.00 | 196.00 | 118.00 |
| Cost of materials consumed | 40.00 | 42.00 | 48.00 | 28.00 |
| Employee benefit expenses | 53.00 | 65.00 | 72.00 | 38.00 |
| Other expenses | 39.00 | 45.00 | 50.00 | 27.00 |
| EBITDA | 5.00 | 9.00 | 24.00 | 24.00 |
| EBITDA Margin (%) | 4.00% | 5.00% | 12.00% | 20.00% |
| Depreciation expenses | 8.00 | 11.00 | 12.00 | 7.00 |
| EBIT | -3.00 | -2.00 | 12.00 | 17.00 |
| Finance costs | 3.00 | 4.00 | 5.00 | 3.00 |
| exceptional items | 9.00 | 0.30 | - | 7.00 |
| PBT | -15.00 | -4.00 | 8.50 | 21.00 |
| Tax expenses | 2.00 | 0.20 | -9.00 | 3.00 |
| PAT | -17.00 | -4.00 | 18.00 | 18.00 |
| Share in profit after tax of JV | -0.14 | 0.60 | 9.00 | 5.00 |
| PAT after tax of JV | -17.00 | -4.00 | 27.00 | 23.00 |
| EPS (Rs.) | -3.60 | -0.80 | 4.80 | 4.40 |