Country's oldest path lab chain to go public with Rs 638-cr IPO

Dr Lal PathLabs is offering 11.6 million shares in an initial public offer

It has the size and scale and sound financial record, with zero debt and a 14 per cent net profit margin. But, Dr Lal PathLabs has also another facet — history.

Offering 11.6 million shares in an initial public offer, it is not only among the top pathology lab chains in the country but it is also the oldest private lab chain with its origins dating back to 1949.

S K Lal laid the foundations of the chain with the setting up of Central Clinical Laboratory in Delhi, four years after partition.

Rawalpindi-born and Lahore-trained S K Lal was forced to move to Delhi along with other members of his family during partition. A doctor by training, he previously served in the  British Indian Army’s medical corps during the second world war.   He took early lessons in pathology  in the Armed Forces Medical College before setting up the lab in Delhi. During 1953-56 he  studied and worked at North Western University and Cook County Hospital in Chicago, developing expertise in the subject.

This was a period when private pathology clinics were  rare  in the country and most people visited government hospitals for tests.  “In the 1950s when my father managed  our laboratory,  it used to get four-five patients a day and by the 1970s, the number increased to 30. Today, we get 40,000 patients a day,” said Arvind Lal, chairman and managing director.

“We now have one central reference lab in Delhi and 171 satellite labs across the country. Besides, over 1,500 service centres and 7,000 pick-up points for collection of samples. Last year, we collected nearly 22 million samples from about 10 million patients,” he added. Lal is a recipient of the Padma Shri and was appointed honorary physician to the President in 2001.

Arvind Lal  took charge of the laboratory in 1977, leaving  his job as an lecturer in Armed Forces Medical College after his father’s death that year.

Expansion began in 1982, with Dr Lal PathLabs appointing franchisees for collection of samples. Around the same time, the laboratory brought an auto analyser for testing samples and  computerised lab operations in 1986. The company took its present name in 1995. Further expansion and modernisation took place with the appointment of professional managers, accreditation from national and international bodies and private equity investment.

Along with Lal, wife Vandana is a director in the firm. The couple along with their children own around 63.7 per cent.  Private equity firms WestBridge Crossover Fund  and Wagner own about 30 per cent.

“We will expand in our core areas which are north, east and central India. We also plan to set up another central reference lab in Lucknow and increase the number of hospital labs under our management,” said Om Prakash Manchanda, the chain’s chief executive.

The promoters and private equity investors in the company have put 14 per cent of the share holding on sale which will value the company at Rs 4,500 crore at the upper end of price band of Rs 550.  The company is not issuing any fresh equity and only the existing share holders are offering their stake for sale.

“The diagnostic business in country is valued at Rs 37,000 crore and is growing at 16-17 per cent which is faster than overall health care sector,” he added. While 85 per cent of diagnostic business market share is held by unorganised-single centre, lab chains control only 15 per cent of the share, he said.