Metropolis is focusing on improving business to customer (B2C) ratio to 62 percent in the next two years.
Metropolis Healthcare, one of India’s largest pathology lab chains, is focused on maintaining its fast growth pace and wants to double the market share in the five focus cities by directly reaching out customers.
Metropolis earned more than half of its revenues from the fives focus cities -- Mumbai, Pune, Chennai, Bengaluru and Surat. In these five cities it earns about 56 percent of revenues from business to customer (B2C) segment.
The company, which came out with an IPO recently, is focusing on improving business to customer (B2C) ratio to 62 percent in the next two years. In FY19, B2C segment stood at 52 percent.
B2C segment refers to customers who directly get their tests done from the lab, contrary to being referred by a doctor or a hospital that generally take a referral commission. The B2C segment is typically a strong driver of profitability.
In an interview to Moneycontrol, Ameera Shah, Managing Director of Metropolis said the company wants to go deep in focus cities, while expanding in other markets.
Shah said while the focus is to grow organically, she is not averse at buyouts if she finds strategic fit.
“In last 14-15 years we did almost 25 acquisitions, we continue to look at opportunities, where we can enter new markets and buy a consumer brand,” Shah said.
Shah added that the economic slowdown is also having an impact on diagnostic industry, where people have been postponing elective surgeries and diagnostic tests, which are not emergency in nature.
While the slowdown is putting pressure on everyone, Shah says it is indirectly helping large chains like Metropolis to consolidate. The expansion of the organised diagnostic sector in India was led by private equity money between 2010 and 2016.
Shah said PE investors, which were betting big on the sector, have realised that this is not an easy market, given that barriers to entry are low.
But the slowdown has helped the large chains.
"It (slowdown) definitely puts more pressure on everybody to survive, but you see fewer competitors enter the market. It also gives you a chance to consolidate your own operations and gives you an opportunity to expand," Shah said.
The diagnostic industry is also seeing pricing pressure, led by deep discounting and predatory pricing practices in the wellness segment or the preventive check ups.
Metropolis is also facing the heat.
"It is very important for the customers to check whether the lab they are getting their check-up done is accredited or not, and its reputation," Shah said.
Shah added that given the lack of regulation of diagnostic industry, there is no standardization or the need for having accreditation from agencies like NABL.
In the USD 4 billion diagnostics market, organised retail chains have a mere 15 percent market share. Hospitals have 37 percent while the rest belongs to the unorganised sector -- run by thousands of small standalone labs run by pathologists and radiologists.
Many labs cut corners, by not practicing good laboratory practices, not employing pathologists, using cheaper reagents, and not adhering to best practices in collecting, transporting and storing blood samples.
Companies like Metropolis are trying to create brand awareness by launching campaigns. Metropolis launched ‘Truhealth’ across 36 cities.
"In the first quarter, we have recorded a 40 percent growth in this segment. Truhealth comprises of mass awareness on the need of preventive healthcare and promotion of customized wellness packages," Shah said.
"It is expected that this segment will grow at a 20 percent compounded growth rate over the next three years," Shah added.
Metropolis is also concentrating on expanding revenue pie from specialty tests like autoimmunity tests, cytogenetics and molecular diagnostics, to protect margins in high competition routine tests blood chemistry analyses, blood cell counts and urine examination. Around 40 percent of revenues of Metropolis comes from specialty tests.
Analysts expect Metropolis to grow its revenues in the high teens for next four years.“We expect Metropolis’ consolidated revenues to grow at 17% CAGR over FY2019-22E driven primarily by 20 percent growth in individual patient revenues," Kotak Securities said in its recent report.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.