Dr Lal back on the acquisition trail, tests South India for opportunities

After a three-year strategic pause, diagnostics firm is unlocking its balance-sheet capacity look for growth-boosting acquisitions

Having spent three years absorbing its largest acquisition, Dr Lal PathLabs is pivoting back to the hunt, scouring the market for strategic deals to bridge its footprint into South India.

 

The country’s largest diagnostics chain acquired Mumbai-based Suburban Diagnostics in August 2021 in a Rs 925-crore transaction — a deal that strengthened its presence in West India but demanded management bandwidth. “We have not done acquisitions recently because the Suburban integration itself took significant bandwidth. That is now largely stabilised,” Ved Goel, Group chief financial officer and chief executive officer, international business, at Dr Lal PathLabs, told Business Standard.

 

With integration largely done, the company believes it is ready for selective acquisitions. But Goel is clear that Dr Lal will not chase deals merely to boost top line. “I do not want to do mergers and acquisitions just to add turnover. Any acquisition must fit strategically. If a space will take too long to scale organically, then M&A makes sense — as it did for the Mumbai market,” he said.

 

South India is an obvious place to expand. Unlike the North, the Southern market is fragmented across multiple states that have their distinct competitive dynamics. “South is definitely a gap area for us. It is not one homogeneous market — Tamil Nadu, Kerala, Telangana, Karnataka are all very different,” Goel said. Dr Lal has built strong clusters in Kerala and has a sizeable presence in Bengaluru — where it is likely the second-largest player in diagnostics — but it lacks a single platform that can deliver scale across the region. Any future acquisitions are likely to be smaller, targeted, and geography-specific.

 

Interest in inorganic interest comes amid Dr Lal sharpening execution in its core markets. Delhi NCR, which is considered to be a mature geography, has emerged as a surprise growth engine. “After many years, Delhi NCR has started growing in double digits,” Goel said. The revival is driven by fresh investments — new labs and collection centres, faster turnaround times, and a technology-led revamp of older infrastructure. Routine reports are now delivered within two to six hours, significantly improving customer experience. “This has driven growth in an established market,” he added.

 

The company has benefited from improving realisations despite muted growth in patient test numbers in the December quarter of FY26. Tests per patient increased about 5 percent year-on-year as customers opted for wellness and preventive packages rather than standalone tests. A richer mix of specialised and high-end testing — particularly in oncology and genomics — and geographic diversification aided margins, too.

 

Radiology is emerging as a measured growth lever. Dr Lal began its imaging pilot nearly two years ago with a single centre and now operates three —with another in the pipeline — largely focused on Delhi. Expansion is calibrated as “radiology is not super-fast. The challenge is not capex, it is finding radiologists,” Goel said, pointing to talent scarcity and regulatory constraints. Analysts see radiology as a steady, margin-accretive option rather than a rapid scale-up opportunity.

 

A recent note by BNP Paribas analysts said Dr Lal’s December-quarter performance underscored the benefits of its volume-led strategy. While patient growth lagged industry expectations, realisations “surprised positively” due to better test mix and higher tests per patient rather than price hikes. They also flagged Delhi NCR’s double-digit rebound as evidence that infrastructure investments are beginning to pay off, even on a large base.

 

Diagnostic growth is stabilising across the industry, driven by preventive health care, rising chronic diseases, and expanding hospital infrastructure in Tier-II cities. Goel believes 9–10 percent growth is now the baseline, with organised players like Dr Lal well placed to consolidate share as they absorb inflation better than unorganised labs.

 

For Dr Lal, a combination of operational momentum and balance-sheet capacity is now the acquisition playbook: A careful expansion with the South in focus.