Indian diagnostic chain Dr Lal PathLabs is looking to tap into potential markets untouched by other organised players in the diagnostics segment. After adding 24 labs and more than 1,684 collection centres in Tier III+ cities between FY20 and FY24, the company has said that it is planning further expansion with the aim of achieving volume growth and reaching untapped regions.
Dr Lal PathLabs plans to add 20 more labs and extend its network into Tier III and IV cities, aiming to achieve volume growth and expand reach. The management recently highlighted the company’s strong brand equity in core markets in North India, specifically Delhi-NCR, during an investor call. They emphasised the value they offer to patients through upselling opportunities and the creation of specialty verticals like Genevolve (genomics-focused), L-CoRD (reproductive diagnostics), and L-ACE (auto-immune disorders).
“A strategic thrust towards widening and deepening our geographical footprint, thereby, delivering sustainable volume and value growth, continues to guide us. Initiatives are underway to gain traction in both B2C and B2B segments,” said Dr Om Manchanda, Managing Director, Dr Lal PathLabs.
“Expanding further into Mumbai and select parts of Maharashtra via Suburban, together with the development of presence in Tier III and IV towns, remains a fundamental goal,” he said.
“To strengthen Suburban’s operations, we’re focusing on sampling promotion and brand building and expect to see traction in the coming months. We are also developing new lab towns to expand our reach,” said Manchanda.
Analysts believe large organised players in the Indian diagnostics space will gain market share from unorganised players. However, they will closely monitor the North India market due to the planned establishment of offline businesses by new-age players.
“We reiterate our view that large organised players in the Indian diagnostics space will gain market share from unorganised players. However, we are closely monitoring the North India market as new-age players plan to set up offline businesses," said Tausif Shaikh, pharmaceutical analyst at BNP Paribas Securities India Private Limited.
The company closed the last financial year strongly, recording a significant 50.8% hike in net profit for the fourth quarter, totaling Rs 86 crore, versus Rs 57 crore during the same period the previous year. With total revenue standing at Rs 545 crore, reflecting an 11.1% increase from the previous year.
Focusing on Tier III+ regions augurs well for the long term for the company, as it has already added several labs in recent years. “We believe this will help Dr Lal PathLabs achieve volume growth and expand its reach in regions untouched by organised players. We remain positive about large organised diagnostic players due to their high-end testing capabilities and brand recognition among medical practitioners,” said Shaikh.
The BNP Paribas report further states that there is an expectation of a double-digit revenue CAGR over FY24–26 and an Ebitda margin of around 26-27%.