At a time when COVID revenues are declining and diagnostic firms are striving to increase their reach to lift non-COVID revenues, Ameera Shah, promoter and managing director of Metropolis Healthcare, one of India's largest diagnostics chains, emphasised that her company's primary focus is on organic growth.
"Our primary focus is organic growth, and we are continuing to expand our network, customers, geography and products to support that," Shah said in an interview with Moneycontrol. She added that while the company is open to good opportunities that could add synergy to the business, the decision ultimately depends on the specific opportunity.
Metropolis Healthcare is investing heavily to boost both its brick-and-mortar lab additions and digital presence for network expansion.
On February 20, shares of Metropolis Health settled 0.85 percent higher at Rs 1,359.40 each on the National Stock Exchange.
Edited excerpts from the interview:
Good results from Metropolis Healthcare in the third quarter. What have been your key takeaways from this quarter's results and what do you aim for in FY24?
Our Q3 results were better than most peers, margins were higher than most. We also gave a commentary that there was a slight dilution in margins which was consciously done for the addition of new labs. The margin was already high, but it would've been higher without lab additions.
We had already made it clear that the kind of margins that we saw during COVID are not sustainable. Keeping that aside, we are comparing pre-COVID margins with post-COVID margins. Pre-COVID, our margin was around 26 percent and we are at those levels currently. Without wanting to go into specific numbers, I would say that steady margins is something we are hoping for. Since we are in the process of adding new labs, the aim is to protect margins at current levels.
Also Read: Metropolis Consolidated December 2022 Net Sales at Rs 285.46 crore, down 2.59% Y-o-Y
New labs and the premium wellness category have been the highlights of this quarter. What kind of growth would you project for the two segments, and is there any target on the number of new labs that will be added in FY 24?
We are not going by any year-on-year targets for lab additions. We are deciding on the number of lab additions on a yearly basis, depending on our situation, but the long-term goal remains intact. We stick to our plan of adding 90 new labs and 1,800 new collection centres by FY25.
In terms of revenues, new labs contributed 3 percent of the total mix and we expect that to remain along similar lines in FY24. As far as the premium wellness segment is concerned, we have seen 30 percent year-on-year growth in this category during the third quarter. This segment is also expected to witness similar growth in FY24.
There has also been a change in consumer sentiment in the backdrop of COVID, as people have become more aware and involved with their health. How do you think that shapes up the demand environment for Metropolis?
I agree that people have become more aware and engaged with their health, but they have not been educated towards the right healthcare. People are not educated enough yet to decide whether to go for affordable pricing or quality and expertise when it comes to check-ups.
The feeling has come, but not there hasn't been a move beyond that. The consciousness regarding features, safety and quality of check-ups and tests is yet to come. To that I would say the market is in an early stage and hopefully, with more education, the wellness category will also develop. On that account, it also presents an opportunity for us to go and educate people and build up that category.
There has been a lot of pricing pressure coming in from health-tech startups. Do you see them causing any major disruptions? How do you plan on navigating through that?
Anybody who understands healthcare will know that price is not the most important factor here. When someone is sick, it is the quality that matters rather than the price. The talk about pricing pressure is partially true for the wellness segment as consumers are not educated, but that is not the case for the sickness category. In this category, it is the quality and credibility that matters the most.
The industry we cater to is 95 percent sickness and illness and only 5 percent wellness. We have seen a lot of companies come up with cheaper tests, but in the sickness segment it is our credibility and expertise that customers are coming to.
While there is competitive intensity in the market, from our perspective, it is putting pressure on price and talent and not on demand. When it comes to Metropolis, we have found that for critical diseases, people tend to rely on and respect our brand. The demand to get tests done for critical issues from Metropolis still remains intact.
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