Mumbai: Piramal Diagnostics Services, a wholly owned subsidiary of drug maker Piramal Healthcare Ltd, is planning a number of acquisitions to consolidate its position, as India’s largely unorganized diagnostic services sector begins to attract more companies, including foreign ones.
“We are exploring multiple acquisition opportunities in the cities where we are already present as well as new regions,” said Bhavin Jhankaria, interim chief executive of Piramal Diagnostics, one of three corporate diagnostics laboratory chains in the Rs15,000 crore local market.
The company, which is currently integrating two joint ventures that it acquired recently, would likely finalize a couple of more acquisitions in the second half of 2010, Jhankaria said.
Entrepreneur Ajay Piramal-led Piramal group, which is currently into pharmaceuticals, infrastructure and diagnostics, is expected to invest up to Rs200 crore for these acquisitions.
Piramal Diagnostics currently has 135 service centres in the country, mostly in Mumbai and western Maharashtra.
Graphic: Yogesh Kumar / Mint
Jhankaria said the company was also looking for public-private partnerships as a growth model.
There were some 10 labs in the pathology segment nationwide that fit into Piramal Diagnostics’ criteria of an ideal acquisition—a minimum turnover of Rs5 crore.
“But in cardiology, there are quite a few, and to be precise 30-40 labs, at present,” he said.
The valuation could be as high as 6-9% of profit in this sector for a strategic purchase. Most of these labs are owned and run by individual doctors or in partnership.
The acquisitions are aimed at scaling up Piramal Diagnostics’ operations to the largest in the country—both in pathology and radiology, said Jhankaria.
“(The) Diagnostics sector will now see some serious consolidation moves, and corporate players such as Piramal and Religare Super Labs Ltd (formerly SRL Ranbaxy Ltd) would drive the trend,” said a corporate adviser with an international consultancy, who did not want himself or his firm to be identified.
Mumbai-based Metropolis Healthcare Ltd is another firm in the domestic diagnostic services sector.
The sector will move up to the next level only when it attains a corporate structure, the adviser said. His firm, he added, had advised on a few acquisitions in the domestic market.
The diagnostic services industry is growing at 15% in India.
It recently attracted the US-based Quest Diagnostics Inc. as well as the Delhi-based drug maker Dabur Group.
A January research report by Bharat Book Bureau, a business information and research house, said it found strong demand for high-quality diagnostic services in the country. “Since the unorganized sector is unable to meet this demand because of low investments, big brands can exploit the situation to expand their operations,” the report said.