Dr Lal PathLabs eyes growth via acquisitions

Dr Lal PathLabs is focusing on “inorganic growth” to expand its footprint across India, particularly in the southern and western regions where the diagnostics chain has little presence.

Inorganic growth arises from mergers or takeovers rather than an increase in the company's own business activity.

The company’s strategy comes as the sector faces a temporary slowdown owing to demonetisation and increased competition. Its other initiatives include value-added services to customers, such as the collation of test results of last 10 visits and a focus on preventive healthcare checks. 

Seventy per cent of Dr Lal PathLabs’s business comes from north India and around 15 per cent from the east. Its business in south and west India is limited, and the company is drawing plans for expansion in the two regions through acquisitions. “We continue to look at inorganic growth, and our teams are working very hard on that,” said Om Manchanda, chief executive officer, Dr Lal PathLabs.

“Our presence in south and west India is not consumer facing. It is B2B focused now, that is we pick up samples from hospitals and send it to our lab in Delhi. We will look at inorganic growth in the south and the west to increase our footprint,” Manchanda said. Dr Lal PathLabs is the oldest pathology lab chain in the country. Currently, it has one central lab, in Delhi, and 179 laboratories, most of them in north and east India. “We have built this business organically and will continue to focus on that,” he said.

A second central lab will be launched in Kolkata in September, and another one in Lucknow by the end of 2018. 

Manchanda said his teams were also working to increase the number of hospital management contracts, sensing a big growth opportunity from the segment. Currently, it has contracts with 22 hospitals across the country. “Lab management contracts are not a way of life in healthcare. But over a period of time, it will become one. It is a large opportunity for us,” he added. Manchanda said the business faced a temporary dip in the third quarter of 2016-17 following demonetisation. While in the first two quarters the business grew by over 20 per cent, it slowed down in the third quarter. 

“There is a slow recovery, and the note ban impact should be behind us from the next quarter. The long-term growth outlook is intact. We will continue to grow faster than industry average of 16-17 per cent,” he said. 

Another issue of concern is the growing competition in the space, both from unorganised players and expansion of test menus in hospitals. Earlier this month, drug maker Mankind announced its foray into the diagnostics and disclosed plans to set up labs in Uttarakhand, Bihar and northeast states.