Metropolis Healthcare Open To Acquisitions; IPO To Hit Street On Wednesday

Diagnostic firm Metropolis Healthcare, which is launching its Rs 1,200 crore initial public offering (IPO) next week, is open to make further acquisitions in this space. The company has used the inorganic route to growth in its initial years and made around 25 acquisitions in the past 18 years.

Sushil Shah, chairman of Metropolis Healthcare, said if a good acquisition opportunity came up, they were open to evaluate it. “We are growing at a decent pace and generating good free cash flow. With the IPO, around 50-60 per cent debt at the holding company level would be gone. It is also easier to raise funds when an entity is listed. Therefore, as and when a good opportunity comes up, we would be better prepared to crack the deal,” he said.

The Rs 650-crore company is focussing on business-to-customer (B2C) expansion in the coming years and would need to bolster its retail presence. “We have made several acquisitions in the past. These have all been leaders in the markets where they operated. It helps to make a strategic entry into a market,” said Ameera Shah, daughter of Shah.

She said that from a 43 per cent share of revenue from the B2C segment, Metropolis was targeting to take that up to 60 per cent in the coming years.

At present, it draws a significant chunk (57 per cent) of revenues from the business -to-customer, which comprises hospital outsourced pathology tests and institutional sales. According to Frost & Sullivan, the Indian diagnostics market was valued at about Rs 59,600 crore in the FY18, and is projected to grow at Rs 80,200 crore by FY20, driven by favorable changes in demographics, improvements in health awareness, increased spend on preventive care and wellness, increase in medical tourists, increase in lifestyle-related ailments and rising penetration of insurance in India.

Organised players control a very small portion of this market; about 10 per cent according to industry estimates.

According to Ameera, there are around 100,000 pathology laboratories in India, almost 90,000 are run by technicians, and the remaining by pathologists. “There is a huge scope for consolidation in this sector,” she said. Metropolis has been clocking a 16.3 per cent revenue CAGR and has a 28 per cent Ebitda margin with 50.2 per cent Ebitda to free cash flow (FCF) conversion. The return on capital employed (RoCE) is also decent at 64 per cent. Its FY18 profits stood at Rs 109.7 crore. – Business Standard