Laxmi dental is an integrated dental products company.It offers a comprehensive portfolio of dental products including 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.

The product portfolio can be divided into three segments: (1) Laboratory: includes custom-made dental prosthetics such as metal-free crowns and bridges, featuring the branded premium zirconia "Illusion Zirconia" crowns and bridges, as well as porcelain-fused-to-metal (PFM) crowns, bridges, and dentures; (2) Aligner Solutions: offers aligners and retainer materials, dental thermoforming machines, biocompatible 3D printing resins, and consumables under the brands Illusion Aligners and Taglus; and (3) Pediatric Dental Products: offers pre-formed pediatric zirconia crowns, SDF, space maintainers, fissure sealants, reinforced splints, and mineral trioxide aggregate.

In H1 FY25, the Laboratory segment contributed 63.07% to total revenue, Aligner Solutions contributed 31.1%, and other segments contributed 5.83%.

Exports its products to 95 countries. Largest exporter for custom made dental prosthesis, catering primarily to UK and US for the Fiscal 2023 among the Indian dental labs.

In terms of geography, domestic sales contributed 67.51% to total revenue in H1 FY25 and exports 32.49%.

Metal-free products contributed to 54.8% of the total revenue from its dental laboratory business catering to the Indian market and to 32.49% of total revenue from dental laboratory business catering to international markets respectively in H1 FY25.

Launched on August 9, 2024, iScanPro is a branded intraoral scanner for digital dentistry, currently used by 264 dentists. In Fiscal 2024, digital impression-based dental restorations made up 48.61% of total units sold in the domestic laboratory business and 55.48% in the international laboratory business.

Launched clear aligners under brand Illusion Aligners, to capture growing Indian aligner market share. First Indian brand to receive 510(k) clearance from US FDA in 2021 to market clear aligners. 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.

Indian clear aligner and custom-made crowns market is expected to grow rapidly over the next few years supported by increased treatment adoption among kids and adults, rising disposable income and propensity to spend on health products with cosmetic elements.

In H1 FY25, tier 1 cities contributed 46.9% to aligner solutions revenue, tier 2 cities contributed 36.87%, and tier 3 cities contributed 16.22%.

Net revenue from Aligners sold by Bizdent Devices, its subsidiary, made up 19.27% of total revenue in H1 FY25, while Vedia Solutions, a division of Laxmi Dental, contributed 9.46%.

Entered the paediatric dental market through its Jointly Controlled Entity Kids-E-Dental LLP by acquiring a 60% stake in 2021. 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. Only Indian manufacturer of US FDA cleared SDF.

Kids-E-Dental derived 22.69% of its revenue from the domestic market in H1 FY25 and 77.31% from international market.

A design registration was granted for "Bioflx," a semi-flexible, tooth-colored pre-formed dental crown for children in India. Additionally, a successful partnership was established with a leading pediatric dental company for the global distribution of Bioflx crowns across 81 countries.

Established 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. Intends to deepen penetration amongst existing Dental Network while also expanding Dental Network.

As of September 30, 2024, operates six manufacturing facilities, three of which are in Mira Road, Mumbai Metropolitan Region, two in Boisar, Mumbai Metropolitan Region, Maharashtra, and one in Kochi, Kerala, and further five supporting facilities two of which are in Mumbai, and one each in Delhi, Bengaluru, and Ahmedabad with manufacturing capabilities. Manufacturing facilities in Boisar and one of its manufacturing facilities in Mira Road have been registered with the US FDA, and all manufacturing facilities in Mira Road and Boisar have been certified by ISO (International Organization for Standardization).

Plans to expand capacities across laboratories, aligner solutions and paediatric dental products businesses.

Intends to scale up its branded product offerings and launch new dental products. In H1 FY25, branded dental products contributed 40.37% to total revenue.

Offer and its objects

The IPO comprises fresh issue of equity shares worth up to Rs 138 crore and an offer for sale of 1,30,85,467 equity shares aggregating up to Rs 560.06 crore by existing shareholders such as Rajesh Vrajlal Khakhar, Sameer Kamlesh Merchant, Jigna Rajesh Khakhar, Hasmukh Vrajlal Khakhar, Amrish Mahendrabhai Desai, Parag Jamnadas Bhimjiyani and Kunal Kamlesh Merchant.

The price band for the IPO is Rs 407 to Rs 428 per equity share of face value Rs 2 each.

The objectives for the fresh issue include Rs 22.98 crore for the repayment or prepayment of certain outstanding borrowings, Rs 4.6 crore for investment in certain subsidiaries, Rs 43.5 crore for funding the capital expenditure requirements for the purchase of new machinery, Rs 25 crore for investment in the subsidiary, Bizdent Devices, for its capital expenditure requirements, and the remaining amount for general corporate purposes

The promoters are Rajesh Vrajlal Khakhar, Sameer Kamlesh Merchant and Dharmesh Bhupendra Dattani. The promoters and promoter group hold an aggregate of 2,40,91,330 equity shares, aggregating to 46.56% of the pre-offer issued and paid-up equity share capital. Their post IPO shareholding is expected to be around 42.68%.

The issue, through the book-building process, will open on 13 January 2025 and will close on 15 January 2025.

Strengths

The second-largest player in the domestic laboratory business and the largest export laboratory by revenue for Fiscal 2024, well positioned to capture a growing share of the Indian clear aligner and custom-made crowns market, supported by new launches.

The only aligner player in India that is fully vertically integrated, with end-to-end capabilities from raw material to distribution, enabling significant control over the supply chain, reducing turnaround time and costs.

Beneficiary of its presence across the dental product value chain, enabling cross-selling opportunities and increasing wallet share from the existing dental network.

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 in turn benefiting players like Laxmi dental.

Built a robust dental network spanning over 22,000 clinics, enabling rapid expansion of services across both metropolitan and non-metropolitan areas.

A strong global presence, serving over 95 countries, with plans to expand into additional regions.

Robust technologically advanced capabilities with stringent regulatory compliance ensuring high quality standards.

Extensive experience of promoters and senior management personnel.

Weaknesses

Reported negative EPS for Fiscals 2023 and 2022 and written off assets in the last three Fiscals.

Statutory Auditors have included an emphasis of matter in their auditor’s report on audited financial statements as at and for the Financial Years ended 2024 and 2023.

There are outstanding legal proceedings (including criminal proceedings) involving the company, its subsidiaries, promoters, and directors. An unfavorable outcome could adversely affect the business.

Subject to extensive and dynamic regulations and any non-compliance with and changes in any of the applicable laws, rules or regulations could adversely affect business.

Exports accounted for approximately 32.49% of its revenue in H1 FY25. This reliance exposes the business to risks related to exchange rates, regulatory changes, and geopolitical factors in those regions.

Lack of long-term supply orders of key raw materials and components from suppliers increases the risk of pricing pressure.

Experienced negative cash flows from operating activities in the past.

Valuation

Net sales increased by 20% to Rs 193.56 crore in FY 2024, compared to FY 2023. The OPM improved by 678 bps to 12.29%, resulting in a 167% increase in operating profit to Rs 23.79 crore. OI declined by 23% to Rs 1.71 crore. Interest costs rose by 23% to Rs 4.95 crore, and depreciation costs increased by 9% to Rs 11.94 crore. PBT stood at Rs 17.49 crore, compared to a loss of Rs 3.31 crore. Exceptional items were negative Rs 0.09 crore, compared to negative Rs 0.35 crore. Tax credit amounted to Rs 9.42 crore, compared to a tax expense of Rs 0.19 crore. Loss from discontinuing operations stood at Rs 1.6 crore, compared to a loss of Rs 0.32 crore. Minority interest was Rs 0.45 crore, compared to negative Rs 0.19 crore. Net profit stood at Rs 24.77 crore, compared to a loss of Rs 3.97 crore.

The annualized EPS for H1 FY25 (excluding extraordinary items, relevant taxes, and loss from discontinued operations) on post-issue equity works out to Rs 7.18. At the upper price band of Rs 428, P/E is 60.

Although there are no listed peers of a similar size within the same industry and business model, Poly Medicure and Prevest DenPro can be considered for comparison.

Poly Medicure traded at TTM P/E of 92 and Prevest DenPro traded at TTM P/E of 47 as on 09 January 2025. The OPM and ROE stood at 12.29% and 78.78% respectively, in FY 2024. These were 26.04% and 17.56% for Poly Medicure,and 35.13% and 18.19% for Prevest DenPro, respectively.