Krsnaa Diagnostics – what is the diagnosis?

IMO, it is better to analyse the fundamentals than speculating on fall from IPO price. Most IPOs are priced high and it is natural for market to rerate post IPO. Also do note that these companies were cash generating machines during COVID and commanded premium valuations. For example, more establish Dr. Lal Pathlabs has corrected 50% from peak.

Krsnaa has many factors that can become a significant moat. Some of them:

1. Good grasp of pricing
2. Knowing how to win bids (linked to above)
3. Strong process for managing B2G contracts (evident from low receivable days)
4. Leveraging economies of scale
5. Baseline capabilities from which to grow new biz (almost no marketing needed)
6. Started generating cashflows sponsoring growth by internal accurals
7. Fast growth in expertise and workforce (can see in LinkedIn)
8. Large market opportunity (even if bid win rate comes down) with first mover advantage

Of course, there are some concerns, which are raised by some of contributors here

1. As with any company, the op margins would compress as the sector matures and competition intensifies. So, there could be some discount given on that.
2. B2G is usually associated with dirty transactions or long receivable days. So, the market can take a long time to rerate the stock.
3. Company’s new ventures into pathology and bet on franchise model might turn out to be a spending frenzy of COVID money.
4. Employee reviews indicate that pay is one of major issue.

For me, it is starting to appear as good value at this price if you remove all of COVID generated money. The key is to see how they use their capital going forward.

Disc: Invested recently.