AI cannot replace human knowledge: Metropolis Healthcare Promoter & MD

In 2021-22, Covid19 business was almost 20-22% of the revenue for most diagnostic companies. The non-Covid19 business is not going to grow by 22% to make it equal

In 2021-22 (FY22), the Covid business was nearly 20-22 per cent of the revenue for most diagnostic companies. While non-Covid revenues have grown, they have not compensated for the loss felt earlier. AMEERA SHAH, promoter and managing director, Metropolis Healthcare, in conversation with Sohini Das, says that price hikes have begun in the sector. Edited excerpts: 

Your non-Covid revenues have grown by about 9 per cent this quarter. But there is an overall drop in revenue in the fourth quarter (Q4) of 2022-23. Has the ‘Covid effect’ not normalised yet?

In FY22, the Covid business was nearly 20-22 per cent of the revenue for most diagnostic companies. The non-Covid business is not going to grow by 22 per cent to make it equal. For us, the non-Covid business has grown 18 per cent this year — this includes revenue from acquisition.

If we take out the acquisition of Chennai-headquartered Hitech Diagnostic Centre (Hitech), then the non-Covid revenue has grown 15 per cent. There is a slight decline. This is the reality for all diagnostic firms.

The 9 per cent growth is only for Q4, attributable to some of our public-private-partnership (PPP) projects ending in February. If we take out the PPP business and hone in on core business, that is business-to-business and business-to-consumer, then we have a growth of 15 per cent.

What steps are you taking to maintain healthy earnings before interest, tax, depreciation, and amortisation (Ebitda) margins?

Our operational Ebitda is close to 27 per cent — similar to pre-Covid levels. The reported Ebitda levels are 25.5 per cent because some investments were made in laboratory (lab) expansion.

In calendar year 2021, we opened 90 labs and 1,800 centres. We have opened 30 labs in two years, and are opening another 30 in 2023-24 (FY24); the balance 13 in 2024-25. Of the 1,800 centres planned, we have opened more than 1,000.

Are you changing your test profile? What kind of tests will you be adding?

We added about 83 tests last year. We plan to add close to 100 tests this year. We are doing a lot of research and development. We have amended our technology stack. This will help us offer superior customer experience and augment productivity. About 16 per cent of our revenue comes from routine tests; 35 per cent from specialised tests.

The premium wellness business has grown 43 per cent in Q4. Is there a change in customer profile or test baskets?

Most players in the industry are doing mass-wellness packages. They are selling on the back of cheap discounts. We are selling on the back of brand and customer experience and focusing on premium wellness.

Have you dropped plans for fundraising or bringing in strategic investors?

We shelved plans to raise funds last year. We never planned to have a strategic investor; it was always a financial investor.

Online diagnostic players are now moving away from a discount-driven model. Will this lead to price rise in the industry?

People have gone back to the original way of engagement. There are the tech-savvy who still prefer digital bookings. Price hikes have begun in the sector. We took some hikes at the end of March. This quarter, we took some small hikes on certain tests. We took a call on low-volume specialised tests and have done marginal price increases. This benefit will come in the first quarter of FY24.

Will there be greater use of artificial intelligence (AI) in diagnostics?

We will automate, but human knowledge cannot be replaced by AI. Pathology is not a business of simply feeding a sample into a machine and getting a report. Pathology is the business of combining the data you get from machines with human expertise and knowledge, and coming up with a report that is useful to a patient.

How has the acquisition of Hitech helped you to gain market share in South India?

We are no. 1 in Tamil Nadu, no. 1 in Karnataka, and no. 2 in Kerala. We are not a significant player in Andhra Pradesh and Telangana. We acquired Hitech because Metropolis is a premium brand in Chennai. We operate with a dual-brand strategy in Chennai. There is an opportunity to grow both categories and by having both brands, we dominate 25 per cent of the Chennai market.

Will you be looking for more acquisitions in the South or any other market?

We think about acquisitions on a city basis. We will look at a bolt-on acquisition in the South. It’ll be no different for the rest of India.