Dr. Lal Path Labs: In this comprehensive report on Dr. Lal Path Labs possibly expanding into Southern India in near future, TISHHA News’ Sugandh khandelwal looks at the opportunities and the new challenges facing India’s largest diagnostic firm.
Dr. Lal Path Labs, India’s largest diagnostic chain, is exploring a significant acquisition to strengthen its presence in South India. A senior company official indicated that if a suitable asset is identified, the deal could range from ₹3000 crore to ₹4000 crore. The firm plans to set up 20 new labs across key cities like Bengaluru, Hyderabad, Pune and Goa in FY25 and is aiming to build hub labs in smaller towns in the northern and eastern regions.
The firm operates in over 1,500 cities across India and offers diagnostic services through a wide network. The company has more than 280 laboratories; 5500 collection centers and 11000 pickup points. It is particularly dominant in Northern and Eastern India, while also growing its presence in the South and West through both organic expansion and acquisitions. Major urban centers such as Delhi, Mumbai, Bengaluru, and Kolkata serve as hubs, alongside smaller cities like Varanasi, Lucknow, and Meerut, which cater to surrounding region.
The company has approximately ₹1000 crore in net cash, and can leverage the balance sheet and equity; size won’t be a constraint,” said Ved Prakash Goel, the group’s CFO, in an interview. He acknowledged that while there are opportunities in the market, valuation expectations are high.
Currently, South India is a weak area for the Gurugram-based company, contributing only 6% of its ₹2,227 crore revenue in FY24. In contrast, approximately two-thirds of revenue comes from Delhi NCR and the rest from North India, with the Eastern and Western regions each contributing 15%.
Last major acquisition & the way forward
The company has established an M&A team led by Ved Prakash Goelto assess potential acquisition opportunities. Its last major acquisition was Suburban Diagnostics in October 2021, during a time when diagnostic valuations were high due to the pandemic. Suburban Diagnostics is a NABL and CAP accredited lab that offers a comprehensive menu of Full-Body Health Check-ups, Pathology, Radiology and Cardiology tests along with several other value-added services.
Dr. Lal’s spent over ₹1,000 crore on Suburban, which provided a strong entry into the Western market, particularly Mumbai. However, some investors were concerned about the steep 18x EBITDA valuation, as Suburban’s margins were inflated by temporary COVID-related testing gains. Currently, Suburban’s EBITDA margin is about half of Dr. Lal’s 28% margin reported in Q1 FY25.
Now, Dr. Lal is particularly interested in assets generating ₹300-400 crore in revenue, with the right mix, quality, and governance practices. The company is open to M&A opportunities in the South, having successfully acquired Suburban Diagnostics in the West. It took about two years to integrate that acquisition, and now we have the management bandwidth and cash available,” said Shankha Banerjee, CEO of Dr. Lal.
lal path labs(LPL) has multiple people involved in its merger and acquisition (M&A) activities includingOm Prakash Manchanda, Ved Prakash Goel and Shankha Banerjee.LPL has been looking to expand its presence in India through acquisitions, including in the south, west, and smaller cities in the north and east. LPL’s M&A strategy includes:
- Acquiring small and mid-sized firms – LPL is looking to acquire firms in Tamil Nadu, Karnataka, and Andhra Pradesh.
- Using a cluster approach – LPL has had success with this approach in the west, acquiring firms in Nagpur, Indore, Yavatmal, and Mumbai.
- Considering city-based acquisitions – LPL is open to acquisitions that help it enter a new market.
- Evaluating potential assets – LPL considers factors such as governance and business profile when evaluating potential assets.
Manchanda said, “Pathlabs Unifiersserves as the holding company for these smaller acquisitions”. They plan to replicate this strategy for the South. Manchandasaid that they are open to making acquisitions that facilitate market entry, even if it entails a city-based approach.
How It started?
Late Dr. Major S.K. Lal commenced the business of providing pathology services and maintaining a blood bank in the year 1949 through sole proprietorship M/s Central Clinical Laboratory and M/s Blood Bank Transfusion Centre. The business of diagnostic and related healthcare tests and services now continues to be provided by our Company.
As of September 2024, the promoter shareholding of Dr. LalPathLabs is 53.9%. The Executive Chairman of Dr. LalPathLabs is (Hony) Brig. Dr. Arvind Lal. Here are some other members of the Dr. LalPathLabs board of directors:
- Dr. Om Manchanda : Managing Director
- Dr. Vandana Lal: Executive Director
- Rahul Sharma: Non-Executive Director
- Somya Satsangi: Independent Director
- Dr. Archana Lal Erdmann: Non-Executive Director
- Rohit Bhasin: Independent Director
- Arun Duggal: Lead Independent Director
- Rajit Mehta: Independent Director
- Gurinder Singh Kalra: Independent Director
Operational highlights:
- 660 patient service centres added in FY 2024 totaling 5,762.
- 681 pick-up-points enrolled in FY 2024 totaling 11,619.
- 78.2 million samples collected in FY 2024.
- 27.6 million number of patients served.
- 36 NABLLabs.
Fiscal Performance:
Reported Standalone quarterly numbers for DrLalPathLabs are:
- Net Sales at Rs 583.90 crore in September 2024 up 9.82% from Rs. 531.70 crore in September 2023.
- Quarterly Net Profit at Rs. 135.20 crore in September 2024 up 19.65% from Rs. 113.00 crore in September 2023.
- EBITDA stands at Rs. 206.50 crore in September 2024 up 16.6% from Rs. 177.10 crore in September 2023.
- DrLalPathLab Earnings Per Share (EPS) has increased to Rs. 16.24 in September 2024 from Rs. 13.60 in September 2023.
Market Dynamics:
- The expansions and increasing penetration by the DrLalPathLabs is also positive for volume growth and market share gains.
- The Revenue Tier 3+ cities have increased 18% CAGR over FY20-23 as per the company.
- The total revenues have grown at a rate of 15% CAGR during the period.
KEY FACTORS IN EXPANSION:
Dr. Lal Path Labs’ expansion plans are motivated by the following factors:
- Organic growth challenges: Organic growth is challenging in non-core markets like South and West.
- Potential of smaller cities: Smaller cities, especially those with populations of 2-3 million, have high potential.
- Available cash: The company has around Rs 1,000 crore (net) cash to leverage.
- Management bandwidth: The company has management bandwidth available to put into the growth path.
Prospective players in South for Dr. Lal Path Lab
Here is a list of some prominent diagnostic centers in Southern India, known for their extensive services and high-quality standards:
| S.N. | DIAGNOSTIC CENTER |
| 1 | Vijaya Diagnostics |
| 2 | Medall Diagnostics |
| 3 | Aarthi Scans & Labs |
| 4 | Lupin Diagnostics |
| 5 | Tenet Diagnostics |
Vijaya Diagnostics:
It is one of India’s largest and most trusted diagnostic service providers. Established in 1981, the center has grown to operate over 140 diagnostic centers across 20+ cities, offering high-quality diagnostic and healthcare services.Found extensively in South India, with major centers in cities like Hyderabad, Bengaluru, and Chennai.
Key Features:
- Accreditations: NABL (National Accreditation Board for Testing and Calibration Laboratories) certified, ensuring high standards of testing and accuracy.
- Services: Includes pathology, radiology, cardiology imaging, cancer detection, digital X-rays, and advanced diagnostics like MRI and CT scans.
- Convenience: Offers home sample collection services and online booking for tests.
- Technology: Equipped with state-of-the-art facilities and skilled healthcare professionals, ensuring prompt and reliable results.
Medall Diagnostics:
It is one of the largest and most trusted integrated diagnostic service providers in India. With an extensive network of centers, it offers a wide range of services, including lab tests and advanced imaging diagnostics.Medall Diagnostics is NABL-accredited, ensuring high-quality standards and reliable results.Operating across South India, including cities like Bengaluru, Chennai, Hyderabad, Coimbatore, and more.
Key Services:
- Imaging Tests: MRI, CT scans, X-rays, Ultrasounds, and Mammograms.
- Pathology Services: Blood tests, thyroid profiles, CBC, and specialized health packages.
- Health Check Packages: Comprehensive full-body checkups tailored to individual needs.
- Home Sample Collection: Convenient options for sample pickup and online result access.
Aarthi Scans and Labs:
It is a leading diagnostic service provider in India, known for its affordability and advanced technology. Aarthi Scans operates over 40 branches, serving both urban and rural areasofTamil Nadu, Karnataka, Andhra Pradesh and Kerala, ensuring accessibility for all.
Key Services:
- Imaging Services:
- MRI (1.5T, 3T) and CT Scans.
- Digital X-rays and 3D/4D Ultrasound.
- Mammograms and specialized scans like DEXA Bone Density.
- Pathology and Laboratory Services:
- Routine blood tests and advanced tests like thyroid, diabetes profiles, and more.
- Histopathology, Biochemistry, and Microbiology diagnostics.
- Health Check Packages:Customized packages catering to men, women, and seniors for preventive care.
- Home Sample Collection:Convenient home collection services with fast and reliable results.
Lupin Diagnostics:
Its, a subsidiary of Lupin Limited, is an innovation-driven diagnostic service provider in India. Established in 2021, it offers a comprehensive range of medical tests and diagnostics with a focus on quality, accuracy, and patient convenience.Lupin Diagnostics has rapidly expanded in South India, including Hyderabad, and continues to build its network nationwide.
Key Services:
- Pathology Services:
- Routine blood tests, biochemistry, hematology, and microbiology.
- Molecular diagnostics, cytology, histopathology, and serology.
- Advanced Diagnostics:
- Specialized tests for infectious diseases, genetic conditions, and oncology.
- High-end diagnostics including immunology and personalized care panels.
- Network:
- National Reference Laboratory in Navi Mumbai with advanced equipment and stringent quality protocols.
- Over 23 regional laboratories, 380+ collection centers (LupiMitra), and 1,200+ sample pick-up points.
Tenet Diagnostics:
It is a trusted name in diagnostic services across South India, offering a comprehensive range of pathology and radiology services. Known for its high-quality standards and customer-centric approach, Tenet has established itself as a reliable partner in healthcare.Theyoperate in multiple cities across South India, includingHyderabad, Bengaluru, Vijayawadaand Visakhapatnam.
Key Services:
- Imaging Services:
- MRI, CT Scans, Digital X-rays, Ultrasounds.
- Specialized scans such as 3D/4D imaging and mammography.
- Pathology Services:
- Routine blood tests, advanced biochemistry, microbiology, and hematology.
- Genetic testing and molecular diagnostics.
- Specialized Tests:
- Oncological diagnostics, cardiac panels, and hormone testing.
- Home Collection Services:
- Convenient sample collection at home with quick report generation.
