Metropolis Healthcare to acquire Chennai-based diagnostic lab for Rs 511 cr

Metropolis Healthcare, a leading diagnostic service provider, is set to acquire Chennai-based Dr Ganesan’s Hitech Diagnostic Centre Pvt Ltd for a cash consideration of Rs 511 crore.

Metropolis will acquire 100 per cent equity of Dr Ganesan’s Hitech Diagnostic Centre in a cash and stock deal. The entity is a debt free company and will issue up to 495,000 equity shares of face value Rs 2 each on preferential basis, subject to shareholders approval, to the promoter group of Hitech. The cash consideration will be funded through internal accruals and a debt of up to Rs 300 crore.

Dr Ganesan, promoter and founder, will be part of the leadership team for the next few years to enable a smooth transition and integration with Metropolis.

Metropolis will get access to 31 laboratories including three NABL and ICMR accredited laboratories and 68 collection centres of Hitech. The acquisition is expected to be completed within three months.

The acquisition will allow Metropolis to increase its B2C business in focus cities of Chennai and Bengaluru and benefit through optimisation of operational costs in the areas of procurement, supply chain, administration and support resource, laboratory network and back office infrastructure. It will further allow the Metropolis brand to make deeper inroads in different customer segments across key markets in South India, said the company.

“In line with the strategy to grow, gain market share and increase B2C revenues in focus cities, we are acquiring Hitech Diagnostic Centre which will strengthen our leadership position in the South India market. Our objective with the acquisition is to increase our market share in focus cities of Chennai and Bengaluru and become leaders in some tier-2 towns in South India. We will capture the mid-segment of the market, increase our B2C revenue contribution and leverage scale benefits through cost synergies.

Metropolis enjoys a good track record of turning its acquisitions to strong and sustainable business and we aim to replicate the same. Hitech is built by Dr Ganesan on the ethos of good quality and service levels, similar to Metropolis, and enjoys a strong brand equity of over three decades. I warmly welcome Dr Ganesan as an executive shareholder and part of leadership team of Metropolis enhancing value for shareholders and bettering service for customers," said Ameera Shah, managing director, Metropolis Healthcare Ltd.

“We are extremely pleased to be associated with a strong customer focused brand like Metropolis. Hitech Diagnostic Centre is a well-known diagnostics chain built over the last 35 years with widespread presence in South India. We share similar business ethos as Metropolis and focus on quality, accuracy, and highest level of customer service. We believe, Metropolis is the right brand to carry forward the legacy of Hitech. We shall ensure a smooth integration of Hitech’s business with Metropolis in our bid to increase the value for the combined entity through cost synergies and create a much stronger consumer brand in South India,” said Dr SP. Ganesan, promoter, Dr Ganesan’s Hitech Diagnostic Centre Pvt. Ltd.

Established in 1986, Hitech Diagnostic Centre runs 31 laboratories including three NABL and ICMR accredited laboratories and 68 collection centres strategically spread across the states of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh and the Union Territory of Pondicherry. Hitech is the second largest player in Chennai behind Metropolis and is a leader in non-Chennai markets in the state of Tamil Nadu.

It is a significant player in Bengaluru market. Hitech caters to the mid-segment of the market and has a large B2C footprint. The Brand has a strong recall in the diagnostics industry in all its end markets. It has a test menu of more than 1,100 tests ranging from routine to highly impenetrable molecular & genetic assays. In FY20, 59% of the test menu was focused on blood biochemistry and endocrinology. The company's revenue for FY20 stood at Rs 83.3 crore with an EBITDA margin profile similar to Metropolis. For 9MFY21, according to management estimates, the revenue growth has been over 50 per cent with higher EBITDA margins partly aided by the current pandemic situation.