SRL Diagnostics, a unit of Fortis Healthcare, is trying to reinvent itself even as its new owner IHH Healthcare will be coming on board shortly.
SRL which contributes about one-fifth of Fortis revenues of Rs 4,537 crore in FY18, has been struggling to grow its margins and revenues faced with competition and pricing pressure. The business is also bogged down by the financial troubles and months of uncertainty at its parent company Fortis.
SRL has also been losing customers and had to shut down several dozens of path labs and collections centres across India.
As part of new marketing plan aimed at boosting wellness – SRL on Tuesday announced Bollywood celebrity Shilpa Shetty as its brand ambassador and rolled out a new preventive customised health-check platform under the brand name ‘SRL CARE’. The company will also be running an ad-campaign figuring Shetty.
New charge
While its competitors Thyrocare and Dr Lal PathLabs grew revenues 17.1 percent and 16 percent respectively, SRL revenues increased by just 7.4 percent in FY18.
The earnings before interest, tax, depreciation, and amortization (EBITDA) of SRL stood at 18.9 percent in FY18 dropping from 21.9 percent from previous year, while its competitors Thyrocare and Dr Lal PathLabs clocked margins of 40.6 percent and 26.3 percent.
“The growth has been probably slowing down over the years, it is not necessarily a recent phenomenon,” said Arindam Haldar, Chief Executive Officer of SRL.
Haldar who took charge in March last year has been busy in last 15-18 months in restructuring the business.
The diagnostic chain redid its operating structure by having geographic business units, as it realised that centralised structure was unable to respond to challenges in local markets.
The company revamped its leadership and reworked on service levels through customer as well as employee engagement.
The company said it is also increasing its coverage of doctors, investing in R&D to introduce high margin specialized tests like molecular diagnostics and genomic tests, in addition to opening up new centres.
The company is also focusing on wellness or preventive health check-ups to shore-up its revenues. Currently, wellness contributes less than 5 percent of the company’s revenues, the remaining is through illness. The new initiative will add to this segment.
Haldar says none of SRL problems were due to group related and were internal.
“We are practically asset light. We are a debt-free company. We have enough cash to fund our operations,” Haldar said.
“We took some time, fill in the people, fill in the boxes with all the checks and balances. We have a longterm strategic initiative in place,” he added.
Haldar declined to comment on IHH Healthcare acquisition of Fortis and future of SRL.
“It’s too early days, the transaction is in the process of getting an approval of Fortis shareholders,” he said.
Early this month - IHH backed by Malaysia’s sovereign fund Khazanah, outbid a consortium of India’s Manipal Hospitals and the US private equity firm TPG by offering to invest Rs 4,000 crore in Fortis by way of preferential allotment at a valuation of Rs 170 per share.
IHH will become an owner of SRL, as Fortis has around 54 percent stake in the diagnostic division.
As per the offer, IHH agreed to buyout private equity firms who own around 30 percent stake in SRL as per the exit obligation. But IHH hasn’t yet provided a clear roadmap on whether it will keep SRL or sell it.
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