Lal PathLabs targets leadership position in west India in 5 years

Om Manchanda, MD, Dr Lal Pathlabs said that the contribution of the west zone has gone up from 6 percent in FY15 to 8 percent in FY20 and 15 percent in the first half of FY23

India’s largest private diagnostic player Dr Lal PathLabs is now eyeing a leadership position in the western India market within the next five years. It plans to do so on the back of Suburban Diagnostics, its wholly-owned subsidiary. 

Suburban Diagnostics, which draws almost 70-80 per cent of its revenue from the Mumbai market, has now opened a 13,000 square feet reference laboratory in the city. This is the first Biosafety level-3 (BSL-3) laboratory by any private diagnostic player, the company said. 

Om Manchanda, MD, Dr Lal PathLabs said that the contribution of the west zone has increased from 6 per cent in FY15 to 8 per cent in FY20 and to 15 per cent in the first half of FY23. 

Dr Lal Pathlabs acquired Suburban Diagnostics in 2021 and decided to go with a dual-brand strategy in the western India market.
 
At the moment, in the west zone, Lal Pathlabs has 36 laboratories, while Suburban has 38 labs. In Maharashtra Lal Pathlabs has 17 labs, and Suburban has 33 labs, and when it comes to the Mumbai market, Lal Pathlabs has 5 labs, while Suburban has 23 labs.
 
The penetration of Suburban Diagnostics in the Mumbai market is high, and with this new BSL-3 reference lab now it would not need to outsource testing. Earlier, the samples were going to the Delhi reference lab of Lal Pathlabs. “In fact, we expect to get test orders from smaller labs and more hospitals apart from retail customers,” Manchanda said.
 
He added that Lal Pathlabs eyes a leadership position in the western India market in the next five years. Suburban Diagnostics would be the Number 2 player (in terms of market share) in the Mumbai market.
 
After this large reference lab, Suburban’s testing volumes have the potential to increase by almost 4-times.
 
Typically, there is an investment of Rs 50-60 crore for setting up reference labs, the company said.
 
Manchanda said that they have positioned Suburban as the consumer facing brand in the Maharashtra market, while the more high-end business comes to Lal Pathlabs.
 
As such Lal Pathlabs plans to consolidate in the western India market and grow organically in the south market for now. It is, however, open to inorganic acquisitions to expand in the southern market if a good opportunity comes through.
 
Lal Pathlabs posted a revenue of Rs 2087 crore in FY22 while its profit after tax came in at Rs 369 crore. This fiscal, it has posted a mixed bag performance so far. For example, in Q2FY23, analysts said that there was slower-than-expected growth in non-covid patient volumes, but a healthy improvement in margins.

% Contribution to Revenues

Particulars

FY15

FY20

H1FY23 Delhi-NCR

50

42 33 Rest of North 25 29 30 East 13 14 14

West

6

8

15 South 5 6 6 Others 1 2 1 Source: Company