Emerging leader in India’s fragmented diagnostics industry

Diagnostics services in India are highly under-penetrated, with only 17% of doctor prescriptions in the country carrying diagnostic tests. This is a sharp contrast with other emerging markets such as Brazil at close to 40%. We believe the number of tests should rise driven by more health awareness and an increase in preventive and wellness testing.

This industry in India is highly fragmented, and has historically been dominated by small standalone centres, most of which are not accredited to the quality standards outlined by regulatory bodies. Less than 15% of laboratories in India are part of organized chains. One such leading Indian diagnostic chain is Metropolis Healthcare, of which we have been shareholders in our Indian Subcontinent portfolios since its IPO in early 2019.

The preference for organised and high-quality laboratories is rapidly growing as increasingly aspirational consumers demand higher accuracy of results and better service standards. Amidst this shift, Metropolis is gaining market share and leading consolidation of the industry. 

It is managed by an extremely capable team, with Ameera Shah at the helm, who is from the second generation of the promoter family. Under her leadership, Metropolis has transformed from a small regional player to a leading, pan-India diagnostics company over the last fifteen years.

Low penetration of diagnostic tests in India

Steady revenue growth while maintaining attractive ROCEs*

*Return on capital employed (ROCE) is a financial ratio that can be used in assessing a company's profitability and capital efficiency.

Source: Bloomberg, Annual Reports, FSSA Investment Managers, May 2021.

Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same.  All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers' portfolios at a certain point in time, and the holdings may change over time.