With a cumulative network of 200 labs before the end of this fiscal and an average of 1 lakh plus tests per day, the merged entity of SRL-Piramal Diagnostic will become one of top 10 diagnostic players globally and the largest one nationally. Sanjeev K Chaudhry, CEO, SRL, shares with Soma Das of FE the contours of the deal. Excerpts:

On strengths that would accrue to SRL as a result of Piramal Diagnostic chain acquisition.

There were three principal drivers behind the deal ?? geographical complementarity being one of them. While SRL has established its clear scientific and R&D leadership in the national diagnostic space and has a very strong presence in the northern part of the country, there was a clear need to replicate that success in other parts of the country, particularly in the strong markets of metro cities. We have accomplished that feat overnight in Mumbai and Kolkata through this acquisition. In Kerala, we have emerged as the undisputed leader. Piramal Diagnostic has a dense network in the western and southern parts of the country and has a considerable presence in eastern part.

Fortunately for us, the catchment areas of 60 SRL labs and 120-odd acquired, Piramal labs do not overlap, which eliminates any prospect of internal competition and clearly expands our spatial footprint across the country. Post acquisition, SRL becomes a true national leader with pan-India presence. Also, through our combined strength, we are now a pan-India player in radio diagnosis and imaging.

Would you now look at centralised lab testing at a global level and how would the deal help add to your bargaining power?

SRL has already worked in a hub and spoke model with five centralised reference labs, albeit at the national level. We have proved our competence overseas too by emerging as a significant player in the Gulf region, Saarc and parts of Europe. Of course, collectively we will have advantages. For instance, our night time capacity would improve significantly. This means although our labs earlier were operating round the clock, the output had a ratio of 70:30 for day and night. About using reference labs for centralised testing globally, that is a clear possibility, especially, in case of

European countries, which are just five-and-a-half hours away, Many diagnostic players there are struggling with four and a half working days per week and a host of other challenges.

As far as bargaining power in procuring hardware inputs is concerned, SRL in its own right has sufficient prowess to get remarkable deal with global medical technology leaders like GE and Siemens. However, if you go by Wal-Mart?s example, there is no end to adding to your negotiating strength.

Two years back, SRL said it would prefer an organic growth to check quality control. That position has changed.

Three years back, we had 20 labs. AT present, we have 60 and there has been a revision in the position. The evaluation in this case was made so much easier as the DNA of both the companies matched. Piramal?s focus on quality, accuracy, customer service, pool of fine doctors and credible practices simplified decision making for us. Between the two companies, we command 40%-45% of accredited capacities in the diagnostic space in the country.Top it with sister company Fortis? business development strength, and we are talking about synergy of a different level altogether. For now, the main focus would be consolidate the recent addition and seamless integration would be the key word even though I do not rule out expansion, either organic or inorganic.

So, Piramal Diagnostic would no more remain listed?

The subsidiary was not listed as an independent entity. It would now be extracted from Piramal Healthcare and become a wholly owned subsidiary of the our company which is closely held. So it would not remain listed anymore, even though our internal corporate governance norms are almost the same as listed companies.

How would you fund the deal? How long will it take to complete it?

We have many options including internal accrual. The deal should be completed in next four to six weeks.