Metropolis will open 90 labs & 1,800 collection centres in the next three years across India: Ameera Shah, MD

Ameera Shah, Promoter & Managing Director, Metropolis Healthcare, talks about Q1FY22 numbers, the impact of capping the COVID-19 tests, Ganesan Hitech deal, organic and inorganic growth opportunities, And margins among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Run us through the highlights of the first quarter of FY22? How many COVID-19 tests were seen in the quarter and what led to a good performance?

A: In the first quarter, we all certainly felt the second wave covid. I think, March and April, were the two months when Bombay and West India has felt this and April and May in North India. So, if you have a look then we as the leaders in West India have conducted maximum COVID testing in West India for sure and in South India probably also. When the wave of COVID comes, the patients focus less on the non-COVID ailments because of their own infections, diseases are reduced because they are staying within the houses due to the lockdown. In fact, the non-COVID infection reduces automatically. So, in the first quarter, we have seen that the non-COVID is slightly dented compared to Q4FY21, where we saw that the non-COVID came back to normal and moving in a positive direction. But it came down a bit in the first quarter but not significant. If you have a look at the long-term trend or a one-year trend, the non-COVID will keep moving up. And we feel that the trend from unorganized to organized of non-COVID will continue to increase and the industry will consolidate more. So, I think, we will continue to see that in Q2 also in July and August we are seeing a non-COVID growth. Now, we will have to see that will we see the third phase in September or not. If we will get a chance to see it then that will again halt non-COVID and COVID testing will increase and if it will not happen then I think Q2 will change. 

Q: What was the impact of a price cut that was seen in the COVID tests on a quarter-on-quarter basis and has the volume came down sequentially? Few cities like Delhi, the antigen test has been capped at Rs 300. Is this enough to cover the expenses going forward? 

A: Price capping has been there in COVID from the beginning. The antigen test about which you are talking has been there since the beginning, even RT-PCR test prices are differently capped in different states. So frankly we have seen two things that if the COVID testing is done on a standalone basis with new infrastructure, new people, new cost then probably it is not affordable if there is a cap on the prices but if you see it based on incremental volume on an existing infrastructure then the service we are providing for the society if not hugely profitable but at least it is adding to the group economics and the bottom line considering that the cost has been infused in the non-COVID. One thing that has also happened in COVID is that the reagents costs are coming down because of competition and on the front, it has made it more affordable. But of course, the capping that is happening now, we will have to wait and see that actually, it is affordable for most players or not. It is too early as orders of Delhi has been passed recently, it is just a few days. 

Q: You have said that there is a slight increase in the non-COVID tests, and you have an outlook that it will increase as COVID is kind of settling and it doesn’t feel that the third wave will hit hard. But what is the number you are anticipating in the metro cities specifically where unlocking has begun? Give us a trajectory for how the non-COVID tests are increasing?

A: It is slightly difficult to give a trajectory but usually what happens is that post-COVID there is fear in people’s minds for a month, so, still they are being very careful. We saw it in June when things were quite low and from July onwards, we started seeing that people are moving to the doctors and are going to hospitals for the non-COVID issues and the non-COVID number is going up. But honestly, there is uncertainty for the people, which means back and forth between COVID, I think, it is still testing time and I believe that this complete year will stay uncertain for most people. But overall as I said the non-COVID is increased and in the direction home services are increasing a lot and if you will have a look then the growth in-home services alone are almost 70% of COVID and non-COVID and if non-COVID is separated from it then it is 130% of the non-COVID. So that is the area that is increasing. We are also expanding our collection centres and labs. In the fourth quarter, we informed the industrials that we are going to add 90 labs and 1,800 collection centres in the next three years across India. This plan is going on and was started in the first quarter and we have opened four labs and about 150 labs in the first quarter and the process will continue across the year. So, the geographical expansion is very important for us as we go to small towns to tier-II and tier-III, and we are providing services for all patients in smaller places where they do not have access. We wish that the world-class diagnostic that we provide should be accessible for every Indian this is why we are also moving to the small cities. Hopefully, it will also give us access and add to the group’s numbers. 

Q: You have Rs 460 crore of cash on books and since the Ganesan Hitech deal is terminated. How do you plan to grow inorganically and are you in talks with other labs for the moment?

A: The last transaction that was informed is on hold and we are still figuring that it has terminated or going forward. If there is some material change then, of course, we will come back and inform shareholders. That is right now is just on hold and on pause. We are going ahead with our organic growth and if there are any inorganic growth opportunities that are strategically quite good, and we feel that it is financially prudent then obviously we will explore it and think that it should be done or not. Recently, we have informed our investors that we are finding that the private valuations are also going very expensive of the lab industry of diagnostic and we will see the prudence and go-ahead that it is worthy or not. But our organic expansion is moving in full force. 

A: What is your outlook in terms of margins going ahead? Also, has the Specialised or high margin tests gone up this Quarter?

A: Last year, we did a margin for the whole year we have done approximately at 28.5% EBITDA margin, and we also guided the investors that we should be able to sustain those margins in 2021-22 and hopefully increase from there. Despite two things that are going to happen, and they include

(i) The greenfield expansion of 90 labs and 1800 centres 

(ii) We are investing in technology and digital initiatives.

But despite these two things, on the other side, we are working on cost efficiency to neutralize the cost. This is a reason that we are expecting that we will be able to sustain the margin and improve them further.