Metropolis Healthcare acquires Core Diagnostics for ₹247 crore, expands north, east footprint
- This acquisition will raise Metropolis’ capabilities in advanced cancer testing, while strengthening its presence in north and east India.
India’s second largest pathology lab chain Metropolis Healthcare Ltd on Monday announced that it had acquired a 100% stake in Delhi-NCR headquartered Core Diagnostics, a prominent player in India’s specialised diagnostics sector, for ₹246.8 crore.
This acquisition will enhance Metropolis’ capabilities in advanced cancer testing, while deepening its presence in north and east India. "Cancer is now globally one of the fastest growing diseases and will continue to be for the next 5-10 years, and Indians need access to the best cancer care diagnostics as well as early diagnostics…oncology is an obvious space for us to want to take leadership in. And with this acquisition, it catapults us to the leading cancer testing chain of labs in the country,” Ameera Shah, promoter and executive chairperson, Metropolis Healthcare, told Mint.
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The acquisition will take place through a combination of cash and stock, with 55% of the transaction in cash and 45% through a preferential issue and allotment of equity shares of the company (by way of share swap). The equity issuance is subject to shareholder approval, and the acquisition is expected to be completed within 60 days. There are no government or regulatory approvals required, the company said in a BSE filing. After the acquisition is completed, Core Diagnostics will become a wholly owned subsidiary of Metropolis Healthcare.
Core Diagnostics registered revenue of ₹110 crore in FY24. In the first half of this year, the company’s revenue was around ₹59-60 crore. Going by run-rate, it would be at about ₹120-122 crore for the year. “When we were looking at valuing the business, we looked at it from two angles, it comes to about 2 times the revenue on the back of Core’s FY 2024-25 revenue, and about 1.6 times revenue when you look at FY 2025-26,” Shah said.
Founded in 2012, Core Diagnostics operates in 200 cities in India, with nine labs—an National Accreditation Board for Testing and Calibration Laboratories (NABL) and College of American Pathologists Laboratory Accreditation Program (CAP) accredited laboratory in Gurugram, a regional reference lab in Hyderabad and seven satellite labs spread across the north, east regions and in Bengaluru.
Leader in cancer testing
With this acquisition, Metropolis becomes the leader in advanced cancer testing in India. Core Diagnostics offers over 1,300 high-end tests, with a primary focus on cancer, serving more than 6,000 specialty prescribers, including over 1,600 top cancer specialists.
“While Metropolis does cancer testing, we do more entry-level and specialized [while] they do more super specialized,” Shah said. Metropolis currently has 4% of its revenue coming from cancer testing and following the acquisition, it will be 10%. “About 37% of Metropolis's revenue comes from specialized tests. And now with Core, it will become 41%,” Shah added.
Core Diagnostics' revenue grew at a 22% compound annual growth rate (CAGR) over the past three years. “So, this is a reflection of the faster growing oncology market, plus their leadership position in the market,” Shah said.
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Out of the 22%, volume growth will be 8-10% and the rest will be an increase in revenue per patient. The revenue per patient is close to ₹2,300 rupees for Core Diagnostics, while it's close to about ₹1,000 for Metropolis.
There will be no change in Core’s pricing, Shah said. “It's really more about the synergies that will come through revenue and cost. The revenue synergy we see is that Metropolis has a large group of customers in West and South where we can sell Core’s diagnostics, advanced oncology tests menu to them,” Shah said. “Metropolis has 4,000 varieties of tests, which can be sold to Core's customers in all parts of India, and especially in the north and east.”
Expanding in north and east
Metropolis has a strong presence in South and West India. As of Q2FY25, 50% of the company’s total business came from the West, about 25-26% from the South and the remaining from the North and East, the company said during their post-earnings investor call.
“With the majority of Core’s revenue coming from Northern and Eastern India, this acquisition provides an opportunity to connect with leading hospitals in these regions,” Surendran Chemmenkotil, CEO, Metropolis Healthcare, said in a statement.
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“Core definitely stands at a leading position because other peers are specifically focusing only on retail or routine testing…so the combination between us and Core will definitely take us to the next level,” Avadhut Joshi, chief business development officer at Metropolis, told Mint.
Metropolis will continue to focus on strategic acquisitions in addition to organic expansion going forward. The company will continue to look at bolt-on acquisitions, as well as acquisitions such as Core “which are specialty segments and having advanced scientific capabilities that allows us to create a leadership position in a technical scientific space,” Shah said.
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Business NewsIndustryMetropolis Healthcare acquires Core Diagnostics for ₹247 crore, expands north, east footprint
First Published:9 Dec 2024, 10:30 PM IST
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