Metropolis' Ameera Shah resists IPO

Ameera Shah is often visited by merchant bankers who propose to take her pathology chain, Metropolis Healthcare, public. Their interest is mounting as the markets are pricing pathology chains at over 50 times their earnings.

The Delhi-based Dr Lal Pathlabs has a market capitalisation of Rs 8,100 crore, 51 times its earnings. The company has 172 laboratories and 6,526 collection centres.  Navi Mumbai-based Thyrocare Technologies is valued at Rs 3,744 crore, 56 times its earnings. It has seven laboratories and 1,041 authorised centres. This is against the average 22 times price to earning ratio of the 30 Sensex firms.

But, the 37-year-old promoter of Metropolis, credited with expanding her father’s single proprietary pathology laboratory in Mumbai into a 150-laboratory chain in 15 years, is in no hurry. “I am not swayed easily. My age provides me a much longer horizon,” says Shah. 

Metropolis has 1,200 collection centres and a presence in six countries, including Sri Lanka, Kenya, Ghana, Zambia, Mauritius and India. Shah plans to enter six more emerging markets and take the number of collection centres to 2,000 and laboratories to 190 in two years. Metropolis is growing through internal accruals and has no debt.

The market is rewarding pathology chains higher valuations, as about 90 per cent of business in India is in the unorganised sector. Organised players, including SRL Diagnostics, are growing rapidly by organising this unorganised business.   

“Only time we will need large funding, whether it is from the IPO market, debt, or PE (private equity), will be when we are doing a large M&A. For small M&As, we will have enough internal accruals,” Shah says. In the 15 years, Metropolis has made 25 buyouts, most of these ranging from half-a-million to a million dollars.

“M&As can be looked only as a cherry on top. They cannot be regarded as bread and butter,” Shah says.

Metropolis first raised funds from a private equity firm in 2005 when it had an annual revenue of Rs 30 crore. At that time, banks could not fund buyouts and it raised the money from ICICI Venture, which invested Rs 35 crore. In 2010, private equity firm Warburg Pincus invested $85 mn, providing an exit to ICICI Venture. 

In 2015, when Warburg Pincus planned to exit, the Shah family bought out its 27 per cent stake for Rs 550 crore, with the backing of KKR India. This increased the family’s stake from 36 per cent to 63 per cent.