Metropolis focuses on North India expansion, acquires Agra-based Scientific Pathology

Metropolis Healthcare, India's second largest diagnostic chain is looking to significantly expand revenue share from North India, a geography dominated by rival Dr. Lal PathLabs through a string of acquisitions, said company's Promoter and Executive Chairperson, Metropolis Healthcare. Ameera Shah, in an interview to Moneycontrol.

The Mumbai-based Metropolis on Monday announced the acquisition of Agra-based Scientific Pathology, founded by Dr Ashok Kumar Sharma, for a consideration between Rs 55 crore and Rs 83 crore, determined at 12.2x of the adjusted EBITDA over a defined assessment period. The acquisition strengthens Metropolis’ presence in Western Uttar Pradesh, accelerates its business-to-customer (B2C) expansion, and unlocks growth opportunities across the state and beyond.
The acquisition will be funded through internal accruals, Shah said.

Scientific Pathology was the second acquisition in last three months in North India for Metropolis. The company has  acquired Delhi NCR-based specialty cancer testing chain Core Diagnostics for Rs 247 crore through a combination of cash and stock in December last year.

Shah said with acquisitions she expects revenue share from North India to go up closer to 13% from 8%.

"It's (North India) a huge market (for diagnostics), UP alone is a 2000 crore market," Shah said

Shah said "discussions are going on" to acquire more such labs across key cities of North India including UP, Haryana and Uttarakhand.

"So there's no one size, but usually a leading lab in a city will be anything from Rs 10 crores to 30 crores of size," she said.

"We have a very small amount of business in North India, compared to the market opportunity, so the market is wide open, it just requires good quality players who can really deliver good services, so we will be bringing some very advanced diagnostics to the markets of UP and North India, which were not seen earlier," she added.

Metropolis is the largest diagnostic chain in Western India, especially in Mumbai, with 56% of its revenue share coming from that geography alone; South accounts for 30%. While North is only 8% and East is 6%. In contrast, its competitor, Dr. Lal PathLabs, gets more than 60% of its revenue from North India.

Metropolis ended FY24 with revenue of Rs 1,189 crores and EBITDA margin of 23.9%.

According to CRISIL Market Intelligence and Analytics report, Indian diagnostic industry is estimated to be around Rs 86,000 crore - Rs 87,000 crore in FY24, of which North India alone accounts for 28-30%. The industry is projected to be around Rs 1.28 - Rs 1.38 trillion by FY28, with North India contributing 29-31%.

Much of North India's diagnostic infrastructure is concentrated in the Delhi NCR region, leaving vast regions still underserved. North India currently has 548 NABH accredited labs, which is lesser than South and West having 679 and 555 NABH accredited labs.

Shah says the accelerated lab network expansion is almost done, and the focus for the few years would be expanding collection centres to enhance volume of tests, increasing business-to-customer through wellness packages.

"We'll go on an accelerated collection centre strategy, the idea will, for each hub, we'll build 30 spokes, and where we collect samples from and bring it to the lab for testing. So currently, our average is about 20-22 collection centres per lab," she said.

"We do believe that in the next 18 to 24 months, there is an opportunity for the margins to move upwards," she added.