Krsnaa Diagnostics has on July 7 received a fresh Letter of Award (LoA) from Rajasthan government, a crucial step paving way for the company to implement state-wide diagnostic services under the National Health Mission.
"...we are pleased to inform you that the Government of Rajasthan has issued a new LoA which has been received by the Company and the consortium will be entering into an agreement with the Authority," the company said in an exchange filing.
The High Court of Rajasthan had passed an order in favour of Krsnaa Diagnostics and its consortium partner - Telecommunications Consultants India (TCIL), directing authorities to proceed with the execution of the agreement as per the terms. The awarding of LoA by Rajasthan government is an outcome of that court order.
In July 2023, the National Health Mission Rajasthan had cancelled the LoA to Krsnaa Diagnostics for providing laboratory services, citing disagreements over 'performance security' needed as per the tender requirement. There were disagreements over this additional performance security because of certain technicalities, which led to the termination of the LoA. Krsnaa Diagnostics was to provide diagnostics initiative as per the hub and spoke model of NHM.
Subsequently, Krsnaa Diagnostics and TCIL initiated legal proceedings to challenge the cancellation and in August 2023, the Rajasthan High Court reinstated the contract, thus reviving the agreement with the Krsnaa–TCIL consortium.
Under the Centre's free diagnostic service initiatives, as many as 12 states have adopted free pathology services from Krsnaa Diagnostics, and 19 states have adopted the free radiology services by the company. Krsnaa Diagnostics has bagged tenders in 8 out of these 12 pathology states and 12 out of the 19 radiology, which implies a 75% win-to-bid ratio, according to the company.
Equirus has called this a 'positive development' that and will facilitate the rollout of pathology labs across Rajasthan. "It is expected to generate Rs 300 crore in revenue, representing approximately 30% of FY27E revenue, with an EBITDA margin of 22–23%," the note added.
A recent note by JM Financial had said that the company's plans to expand retail contribution from ~3.5% for Q4FY25 to 5-8% in FY26e. "Given the potential value unlocking of retail business (leveraging the PPP infra), rampant expansion plans and budgetary tailwinds for PPP diagnostics; we remain optimistic on the stock and maintain BUY with a TP of INR 1,074 (24x June’27 EPS)," the note had said.
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