IPO is quite suitable to companies that have a proven track record

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Updated: June 08, 2016 3:59 PM

In the recent times leading diagnostic players — Dr Lal Path Labs and Thyrocare who went IPO have got a pleasant welcome at the stock market. Will SRL be the next? To find answers to this, Raelene Kambli speaks to Sanjeev Vashishta , CEO, SRL Diagnostics, who shares his views on the same and provide information on their expansion plans and their partnership with three state governments in India

In the recent times leading diagnostic players — Dr Lal Path Labs and Thyrocare who went IPO have got a pleasant welcome at the stock market. Will SRL be the next? To find answers to this, Raelene Kambli speaks to Sanjeev Vashishta , CEO, SRL Diagnostics, who shares his views on the same and provide information on their expansion plans and their partnership with three state governments in India

What is SRL’s turnover in the last quarter?

201606ehm11We are in the process of finalising our accounts as the audit is under way. Being part of the listed entity, we can’t provide any guidance on the numbers till the time the same are made public following the proper process. However, the company is growing in a very sound manner. The company’s revenues have grown at 15 per cent CAGR during the last four years and during the corresponding period the CAGR growth of EBITDA is around 35 per cent.

What is the current valuation of your company?

We have not looked into the valuation of the company as there was no need to do so. Valuation is carried out for specific purpose viz, the company is going public or inviting the investors to invest in it unless the company is already a listed entity with an established market cap. Further, the valuation is determined by various factors such as size and scale of operations, the financials of the company, it’s potential to grow/ ability to generate profits/ return on investment in the future, how good the management is, whether there is a balanced distribution of revenues/ business from various geographies or it is concentrated in a particular geography etc. Finally, the value of the company has to be determined by someone who wants to invest in that company. Given the fact that SRL is the largest network of labs with a very balanced geographical presence, professional management, growing EBITDA margins and all the right building blocks, it should command a good valuation in the market.

What is your opinion about going IPO?

As CEO of the organisation, my task is to take SRL to the newer heights which it so rightly deserved. As management, we have to ensure that we give best possible diagnostics facilities and services to all our customers. Whether to go public or not is something that the company’s investors’ and board members have to decide. As of now, my focus is to fill the capacities that we have created over the last few years and make the operations more and more efficient and effective.

Is going the IPO way a good strategy for the diagnostic player to expand its business?

IPO is one of the ways to garner the funds to expand the operations. Various options of funding are available to various enterprises and IPO is one of the options. Like any other industry, raising funds through IPO is one of the options available to the diagnostics industry to garner funds for expansion. IPO is quite suitable to the companies that have a proven track record of consistent performance.

Has the successes of your competitors on the stock market have impacted your business in any way —  positively or negatively?

IPO is just one of the options to garner the funds. Success of the competitors on the bourses doesn’t have any direct impact on our business. However, it certainly gives visibility to all the established players who are carrying out the business efficiently.

There is news about your company’s valuation being increased after your competitor diagnostic chains going IPO.

I would surmise so. Given the fact that there are very few diagnostics players in the organised sector, the rub off effect on the valuation is imminent. As such, SRL is the flag bearer of the diagnostics industry with 315 labs and over 7000 collection points in and outside of India and it is known for the superior quality/ accuracy of results, quick turn around time (TAT) of its tests at affordable prices.

SRL recently announced an aggressive expansion plan with an investment of more than Rs 300 crores in the next five years. What is the development on the same?

One of our prime focus is to create an unparalleled ‘reach’ to ensure that we are closer to our customers and patients. There is no sense in people travelling long distances for getting superior quality diagnostics services. We are expanding our network to reach out to the masses and also centrifugally taking the technologies out to the network labs beyond the so called reference labs to facilitate quick turnaround time for at least 75-80 per cent tests. Now, we are working very closely with various state governments under the PPP initiatives and setting up labs in the remotest of areas whether it is Rohru and Kurseog in Himachal Pradesh or Pakur, Dumka or Giridih in Jharkhand. We are also partnering with various multilateral agencies including UNICEF where we are testing the masses in 1900 villages spread across all the 30 states in India at the behest of UNICEF.

How are you going to raise these funds and how do you plan to utilise these funds?

Given the fact that SRL is a profitable company with healthy cash flows, the internal accruals are more than sufficient to take care of all its expansion plan. I am also pleased to share with you that in the first quarter of FY 17, SRL is slated to become debt-free company.

SRL has also tied-up with three state governments. Can you throw more light on the same?

That’s correct. We are running diagnostics facilities under the Public Private Partnership (PPP) in three states i.e., Himachal Pradesh, Uttar Pradesh and Jharkhand where we are providing superior quality diagnostics facilities at the government determined prices from about 40 labs which we have created in various government hospitals and many collection points.

raelene.kambli@expressindia.com

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