PharmEasy-Thyrocare Deal: What this means for both companies, shareholders? Anil Singhvi explains why investors should hold this stock

Online healthcare start-up PharmEasy has announced its acquisition of Thyrocare Technologies, an established diagnostics business. Speaking on the valuation and the deal Anil Singhvi, Managing Editor at Zee Business said that this acquisition is very interesting.

Thyrocare promoter A Velumani comes from a very small place and belongs hails from a family of farmers and he has established a big empire, the Managing Editor said lauding the promoter. A big vision and lots of effort is required to establish a company like this and if he wants to sell his stake after reaching this level then there is nothing wrong with it, Singhvi said. 

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"I think he is getting a good valuation," the Managing Editor said.

If we will see the current valuation then it is at a PE multiple of 65-70. On looking at its valuation with next year's horizon, then the stock is available at a PE multiple of 50 and for FY 2023 it is at a PE multiple of 40, Singhvi said. 

#Thyrocare को खरीदेगी #Pharmeasy...

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"So, he is getting a good valuation and there is no doubt about it," he further said.

On the growth potential, he said that the path lab business is at its peak now amid the Covid-19 pandemic and its revenues are also at around the highest level. This is the right time for a promoter to sell his stake, the Market Guru added.

One more interesting point is that a loss-making company PharmEasy is buying a strong profit-making company. Velumani is selling his stake at a good valuation so it is a good deal for him. While for the API this is good that a brick-and-mortar business will come in a loss-making company, which will either reduce its losses or will be seen making profitability, he added.

Thyrocare Technologies shareholders may see the price to be low, Singhvi said from the standpoint of investors. In a short term, investors may think that if you are selling a 66 percent stake and giving a controlling stake then you should get a big upside and strategic premium. It is not wrong to think so he said. "But if you see it according to the valuation then the current valuation of 65-70 while for the next two years it is at a PE multiple of 40 which is not bad. You can always expect more," he added.

The price is around Rs 1300 while the stock is currently trading up. He said that stock movement may be low in the short term, but PharmEasy is a strong company and the amount which is required for the future growth of Thyrocare could come from PharmEasy.

Overall, it is a win-win situation for both companies, Anil Singhvi added.

The Market Guru said that whatever short-term movement comes in Thyrocare the investors should understand that it is a good deal and if they have shares of Thyrocare then they should hold it.