Diagnosis plays a crucial part in determining the nature of the disease and treating it. India’s diagnostics sector is largely volume-driven and is highly fragmented. According to a recent report, the Indian diagnostics industry is projected to reach $25 billion by FY28, up from $13 billion in FY23, backed by attractive margins and growth potential.
In Q4FY24, one of the key players, Metropolis Healthcare recorded fiscal fourth quarter profit at Rs 36.53 crore, up 9.1 per cent in comparison to Rs 33.49 crore during the corresponding quarter of previous fiscal year.
The diagnostic company posted revenue from operations at Rs 331.00 crore, up 17.1 per cent as against Rs 282.55 reported during the fourth quarter of FY23. The company’s EBITDA stood at Rs 80 crore, up 14 per cent on-year. In an interaction with Financial Express.com, Surendran Chemmenkotil, CEO, Metropolis Healthcare talked about the company’s upcoming business growth plans for FY25, M&A deals, recent trends in the sector and lots more. Excerpt:
Could you highlight some of the driving factors of your revenue growth in Q4FY24? Also, what are your expectations from FY25?
We had an exceptional quarter in Q4. We have grown the revenue by 11 percent and on a core revenue, which is minus the private-public partnership and the COVID etcetera, if you remove it from the denominator for the previous year, we grew by 15 percent on a core revenue basis. And we also came back to our EBITDA levels of 25 percent plus. So overall, if you look at any parameter, every financial parameter, we’ve done exceptionally well in the last quarter.
So out of the 15 percent growth, about half of the growth is coming because of volume growth, 7.5 percent is the volume growth. I can explain to you what is driving volumes at a later stage. But seven and a half percent is coming on the back of the patient volume growth. And the remaining seven and a half percent is growing because of the realization growth. Now, the realization has two components. One is we did a price increase in from 1 January. Now that is giving me almost about 3.5 percent of the total growth of 15 percent.
And the remaining four percent is coming from the mix of the products, you know, the high-end products and the specialty products and the wellness products growing faster than the normal business is helping us to do the realization getting better. So that’s a split of the 15 percent growth if you ask me now. I mean, how do we do it going forward? So, we are excited at 13.5 or 13.3 percent on a full-year basis. Right. And I would like to see this getting better during this year. So maybe I
aspire to get into mid-teen levels of growth during this year.
And at 25.5 percent EBITDA that we are exiting, you know, like to continue another same level or maybe it up by another half a percentage or a percentage in the next year. So that’s largely my, you know, aspirations for the year 2025.
So specifically, talking about your portfolio, what has been your focus on the wellness segment and the B2C segment and what are your expectations on the performance of these segments in FY 25?
So let me first get into the B2B, B2C segment. So, in Q4 you could see 20 percent growth in the B2C segment. Of course, largely driven by about five to six percent is driven by the price, right? And 20 percent growth. We did it in 19.6% to be very precise. Of course, the Mumbai market has done 20% above kind of growth, right? So B2C has grown at about, you know, 19-20% for the country. And B2B has now got into two-digit growth. Now 11.1 percent is what we did in Q4. So, for us, both the cylinders B2B and B2C were fired in Q4.
We have done a lot of work also to correct the B2B segment in terms of a revenue growth perspective. So that’s helping us. And now coming to the category of products, wellness has grown by 22 percent in Q4. And on a full-year basis, we grew by 22 percent. That’s the premium wellness segment. Right. And our other big segment is specialty. The specialty is grown about 16.5% in Q4. So that’s all the high-end tests, you know, that one which you do for gastro neuro nephrology, on oncology. All the specialized high-end tests that grew by, you know, about 16 an hour percentage, you know. So that’s the composition of the category of test and also the segments B2B and B2C.
If you look at the diagnostic sector of India, it’s quite fragmented. There are a lot of players. So how is Metropolis looking at this fragmented market as an opportunity, both as an opportunity and a challenge? And how do you see yourself performing in the next five years or so?
You’re absolutely right. It’s a very fragmented mark, a very unorganized market if you see it. And if you can see in the last two to three years, particularly after Covid, the overall awareness of the consumer about health awareness and also wanting to get good quality of tests done, accurate tests, timely tests…has gone up. This is the organized sectors and the quality players like us. And secondly, we have a large test menu. We have almost 4000 tests. Whereas most of the labs that you see on the corner can only do about 40-50 tests. Metropolis is largely powered by the doctor’s endorsement. If you go to a doctor because, at the end of the day, the doctor wants a good test, good quality test report for him to diagnose the patient. It reflected in my specialty revenue growth of 16.5 percent in the last quarter that you can see it. One is the consumer wants a good quality test. And the second one, we have a huge test menu. And also, we are expanding into the geographies and making it closer to the consumer. The last one is a specialty which is the strength of the metropolis has explored all the markets that we operate.
In the recent years, what are some of the trends that you have observed in the diagnostic sector and how metropolis is looking at these trends as a business opportunity or growth opportunity?
We are now clearly seeing an opportunity to penetrate into tier two, tier three cities and maybe even go into tier four cities. We set up 25 labs last year and we want to set up another 25 labs. Most of these labs will go into tier two, tier three cities. And our collection center that you’re setting up now, we’ll go to tier three, tier four cities. So that’s one great opportunity awaiting us, you know, in terms of going and growing. Right? We are expanding in the areas of genomics, and molecular diagnostics. All that is new avenue is waiting for us. That’s going to be the future of the industry. So, we are investing there. We are bringing in skill set, we are bringing in machinery, us to do all these kinds of new aged tests. All these aspects are helping us to look at this market more precisely and carve out our share of growth possibilities.
Is Metropolis has any plans of geographical expansion, especially in tier three, and tier four cities?
Currently, Metropolis is operating south and west geography, markets. We are very strong. We are almost very well penetrated to most big towns and big cities in these places. And whereas north and east are the opportunity market for us. We are there in the north and east, but not necessarily in every town, every big town, or every town that can provide a good business opportunity. So, our expansion strategy is twofold. One is to go deeper into strong markets. So, let’s talk about Maharashtra, which is a strong market for us. We are getting into labs are coming in places like Chandrapur or Malegaon or Jalna that is going deeper.
And whereas, you know, similarly for the states in south Tamil Nadu or Kerala, we are putting up labs to go deeper in the market. But when it comes to the other two geographies, which is north and east, we are going wider. That is the strategy that we are adopting. And this year we have picked up four big states for our geographic expansion. At least we have a focused approach and we put teams around these states. One is the undivided Uttar Pradesh and second one is the undivided Andhra Pradesh and third one is Madhya Pradesh, and the fourth one is Assam and Northeast. So these are the four geographical states that we picked up for this year’s focused attention on expansion. Now, let me also tell you, when I’m talking about expansion doesn’t mean only the labs. The labs would come up in tier two, and tier three towns. Our ability to bring the sample to the nearest big town is only getting better. Hence, that encourages us to go into tier three and tier four towns. So, labs in tier two, tier three towns, and centers going up to tier four towns will be our strategy.
What are some of the key focal areas for the Metropolis in FY25?
I’ll talk about both the organic and inorganic plans for us. On the organic growth prospects, there are four major aspects. You know, one is a geographical expansion in terms of labs and centers, both. The second one is we will keep thriving on the wellness revenue that we are growing currently at 22 percent. We keep working on this, keep getting this better. The third one is to focus on specialty revenue by building more tests now, by getting volumes from B2B and hospitals and labs, etc. The third is to make our specialty stronger. And fourth one is introducing more and more digital capabilities, both at the front end as well as the back end. Front end, for improving the consumer experience. And on the back end to improve the process efficiencies and productivity. So, these are the four big focus areas for us when it comes to growing the business organically. We’re also looking at inorganic opportunities. We just keep exploring inorganic opportunities across the country, basically from two lengths. One is in geographies, where we want to expand and where there’s a good opportunity, and good asset available. We look at acquiring those assets. And the second one is, our eyes are open when it comes to the acquisition opportunities available in the country. So, these are the priorities for this year.
I wanted to understand if you’re also looking at exploring new disease segments or introducing new tests to the market. Are you also looking at those aspects?
Last year we introduced a hundred new tests. A research and development department is working, with an innovation department working under the science team here. They keep looking at what are the various kind of new tests and new areas worldwide, what is happening and what is the space that we are not there. And that kind of opportunity is available in India. So, we keep exploring the opportunities. 100 tests. Last year we launched it. It’s not that we are chasing any target here, but we keep studying the market, the international market. We keep studying the competition and we keep studying the opportunities available in the market. And our R&D team lives up to the challenge and delivers a test that can fulfill the market. Or maybe the clinicians, we take a lot of feedback from the clinicians and they let us the kind of tests required in terms of diagnosis. So, all that put together, we keep deciding the new list of tests to be done.
There has been a lot of restructuring in the leadership team. What is the objective and expectations from this change? Also, it seems like a lot of responsibilities coming your way. So how do you see that as an opportunity for the growth of Metropolis?
We have a very good quality of leadership team here. All the CXOs were put together in the last year…we built this team. We brought in some of these positions, and we have also restructured the simplified organization structure and removed one layer. This helped me to get the operation and execution better. Ameera moved in from a managing director role to an executive chairperson’s role. She will continue to be available for us for our guidance. Dr. Sushil Shah gets into a position of chairman emeritus where he is available for all his help. And he has been there from a medical point of view, from a technical point of view, one of the finest of the mind available in the country. So, we will keep having his attention and his guidance when it comes to anything to do with medical, and with Ameera being the chairperson and running the organization when it comes to the business, I think it’s one of the best combinations to get into and I’m sure Metropolis in the new structure is going to scale new heights in this year and going forward.
