Looking at setting up a regional reference laboratory in Eastern India: Dilip Bidani, Dr Lal PathLabs

You have got a strong network and presence in north India and the street is betting on the expansion plans and East India now to be aiding your growth. Going forward, what is it that you have envisaged in terms of an expansion and a planned strategy for East India market?

For the East India market, our basic strategy is that we are now very strongly poised in the eastern part of the country with a good presence. We are looking at setting up a regional reference laboratory there, which should be ready in the next 12 to 18 months.

We expect that that is going to service the eastern part of the country, which covers not only West Bengal around Kolkata, Odisha, Bihar, but also the north eastern states. We hope to capitalise on the kind of large population belts that are there. Currently, we believe, it is very under serviced and we can actually bring good quality diagnostics closer to the people ..

It is a very niche business right now and the market size is so large that the existing players are scratching the surface. But the challenge is that the competition also has intensified and the competition will only intensify going forward. Two-three years ago there were only four or five large organised players. Now I can count at least 10-12 organised players.

The healthcare sector, particularly the diagnostic sector, still has a largely untapped and under serviced area. If you look at healthcare, healthcare today is growing at 12% to 13% as per studies, whereas diagnostics is growing at a much faster rate, 16, 17, 18% is the kind of estimates that one sees in the market.

We must try to see what is causing this change in the marketplace. One is that there is a very highly fragmented market, people are going in for more testing because there is a greater emphasis now on treatment being prescribed post diagnosis and not merely on the feel of the pulse.

Actually, there is a lot more emphasis being given to diagnostics. It is a fragmented market where consolidation is definitely going to happen. As far as people becoming brand conscious, quality conscious and moving to more organised players are concerned, we do see a great opportunity in this healthcare space. In the diagnostic centre, definitely it is going to grow faster than the overall healthcare segment.

A recent Kotak report says that "they are confident of a CAGR growth of about 18% to 20% from FY16 to FY19". Are they being optimistic, are they being reasonable, or are they being slightly unreasonable here?

I cannot comment on the basis of their specific futuristic guidance. We are not giving any guidance as such. Any indication which is growing at 16% to 18%... my guess is that you can take a view from that.

You have given us a broad view, but I am sure you are in a better position right now to give us a sense of what kind of numbers you will clock in for the end of FY16, and more importantly, FY17 as well.

FY17 is a bit difficult to give a futuristic guidance. FY16, the nine months period we have seen a 21% growth in revenues and you can draw your conclusions, we are doing well.

The stock is extremely active. While you may not be able to give me an exact number for FY17, surely you have a sense of how the year could shape up in terms of percentage growth, a ballpark estimate of the sales and the PAT growth numbers that you could see?

As far as the past growth and trends are concerned, you can try to extrapolate those and you can also look at various research analyst reports which are coming out. We have been giving out a strategy as to what we expect to deliver our strategy, how we want to grow the market, how we want to participate in the growth that are available in the eastern and central parts of the country, the northern part of the country and our past three years prior to FY16 our growth has been a CAGR of around 20.7%.

At this year also we are driving the business at 21%. That should give a very good sense of where we should be, without trying to quote any specific numbers.

What could be a big driver or kicker for you to clock in a higher number than what you have been doing? The run on the mill business what you have been doing is going ahead well. Is there something new that you could be planning, that could add a revenue line or a bit of kicker to your earnings over the course of the next two or three years?

Preventive health checkups is an area which we believe will continue to grow. While we have been providing this offering, there is certainly an opportunity here to increase our offering in the preventive care space. Recently, there was an incentive given under the Income Tax Act that for preventive health checkups you can claim certain IT deductions. This is something which I feel could possibly be an area where we could provide greater leverage to the growth of the business. But only time will tell.

One concern which analysts regularly flag off, and that is not about your company, but for every company which is in the consumer space or in the health care space is capital allocation. I want to understand your capital allocation plans. So far, you have stuck to your basic knitting, you have not diversified, you are in the diagnostic space, you have stayed to that business.

As far as capital allocation is concerned, our large investments will go into setting up a couple of regional reference labs which we have been talking about, which will take up Rs 40-45 crores each.

Going forward we also want to invest in higher end testing and so therefore there would be investments in higher end technology which we would keep investing on an ongoing basis.

In addition, there would be satellite labs which we have been doing in the past and which we will continue to do. Therefore, all this will certainly add to the capital as we go along and our capex will be there.

Your stock is at a fresh 52-week high, markets have gone other way post IPO there has been some degree of volatility which is there in the market. But your stock is sitting at a fresh high. Since you have access to your shareholder data can you tell me a list of some of your largest key shareholders?

If you look at the largest key shareholders, there is hardly any liquidity in the market right now. Therefore we had diluted 14% of the stock as an OFS. I have not seen the latest trends, but there are a couple of large shareholders which are there, but by and large it is a very low volume stock right now.

While the stock is at a high and you have seen a certain kind of increases which have been taking place, I really cannot comment on what is driving that. And as far as the stock holding is concerned, I have not seen the latest stock holding pattern, but it is a pretty low volume stock at the moment.

Disclaimer: This info has been published and collected from various public & secondary resources.