Diagnostic chain Metropolis says ramping up labs, collection centres

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Healthcare, one of India’s largest diagnostic chains, said it is ramping up testing capacity across its existing network as well as adding 90 new testing laboratories and 1,800 collection centres in next three years.

In addition the Mumbai-based company said it is also investing on digitalization to enhance productivity, consumer engagement and research into developing specialised testing.

In an interview to ET, Metropolis managing director Ameera Shah said the company will investing Rs 50 crore on setting up 90 new labs, and investment for putting up collection centres will be much smaller as they are largely born by the franchisees.

The company plans to end FY22 by adding at least 25 laboratories and 700-750 collection centres.

In the first half it has opened 7 labs and 451 service centers. Most of the expansion will be in Mumbai, Pune, Chennai, Bengaluru and Surat, which it call it as focus cities. The company expects in FY22, alone Metropolis it will expand its service network capacity by 18%.

Shah says the break even of a new lab takes about one-and-a-half year time in focus cities, two-and-a-half to three years in other cities. The maturity of the collection centres takes about 3 years.

Metropolis operates 132 labs and 3006 collection centres as on September 30, 2021. In Metropolis will also be investing Rs 15 crore – Rs 20 crore per year on digitalisation.

“Our strategy .. is to deepen (presence) in the five focus cities, the second is to build our specialized portfolio of test even more and the third one is the digital transformation,” Shah said.

Shah added that currently specialized tests contribute 43% of its business.

“We believe that this can go to 50%,” she said.

Non-COVID testing

Metropolis like other large India diagnostic chains took benefit of COVID-19 RT-PCR testing in FY21, when it expanded its margins by YoY by 290 basis points to 30.2%. COVID-19 testing alone in 23% of FY21 revenues at Rs 998 crore rising by 17% YoY.

While the non-COVID testing has increased 38% year-on-year (YoY) to Rs 260 crore in Q2FY22 on a low base of the corresponding period last year. But Shah says the west and south Indian markets where the company has a large presence business is still to be normalized to pre-COVID levels.

Even as the non-COVID testing is taking time to reach pre-COVID levels, the COVID-19 testing has fallen from the peak Rs 100 crore in Q2FY21 to Rs 43 crore in Q2FY22, as the cases declined.

Shah says that the decline in COVID testing isn’t just because of declining cases, but also the drop in pricing of RT-PCR test as well.

On positive side, the company says the revenue per non-COVID-19 test grew at 12.1% to Rs 976 in Q2FY22. Shah said the company .

Shah said the company will retaining the 30% EBITDA margins of FY21, despite the expansion eating about 75 to 100 basis points in the first year.

Shah says that the decline in COVID testing isn’t just because of declining cases, but also the drop in pricing of RT-PCR test as well.

On mergers and acquisition, Shah said the company’s immediate focus is on integration, unlocking synergies and the growth of its largest ever acquisition of Chennai-based Dr Ganesan’s Hitech Diagnostic Centre, which it concluded last month.

The Rs 600 crore acquisition of Hitech gave Metropolis access to 31 laboratories including 3 National Accreditation Board for Testing and Calibration Laboratories (NABL) and Indian Council of Medical Research (ICMR) accredited laboratories and 68 collection centres of Hitech.

Shah has indicated that the company was scouting for selective buyouts of pathology labs to expand further in regions where it is already present and fill the vacuum in states such Madhya Pradesh, Maharashtra, Gujarat, Uttar Pradesh, Orissa, Jharkhand, Telangana and Andhra Pradesh.

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