Sector Outlook 2022: Metropolis will open 90 new labs, 1,800 collection centres in three years: Ameera Shah, Promoter & MD

Ameera Shah, Promoter & Managing Director, Metropolis Healthcare, talks about Metropolis test preparations against Omicron, how the year 2021 has been for the industry and the company; organic and inorganic growth plans in the domestically and international markets, among others, during an exclusive interview with Anil Singhvi, Managing Editor, Zee Business. Edited Excerpts:

Q: There is a fear about Omicron that it spreads faster. If there is a surge in testing needs then is your company prepared for it?

A: Yes, we are fully prepared for it. We are one of the largest chains in the country and we are carrying a complete COVID testing capacity. We are not thinking about the cost just we are sitting with the preparations that if the wave comes, then we can take care of the people. We have a large capacity today and I would say that even 25% is not being used now on a daily basis, so, I think that we are quite comfortable for the months to come. But of course, when the wave hits then overnight it happens suddenly and if there will be a double requirement of the capacity then obviously we will be in trouble but hopefully no.

See Zee Business Live TV Streaming Below:

Q: Will normal tests like RT-PCR and tests conducted at the labs will work on Omicron or does it requires any special type of test?

A: Omicron is basically a variant of COVID-19, so, the chemical that we used to perform normal RT-PCR, is not required here but a special kit is required for infection. The kits that we used to pick up the Delta virus will not necessarily pick up Omicron. So, we are working to have that kit and use those kits that can pick up Omicron. Currently, it is not normal in India that everyone is using Omicron kits because these Kits have not reached the market and their availability is difficult. At the same time, many labs would not be aware of the fact that these kits are different. So, we have done it at the initial stage using the kits which are special for Omicron, so there we are able to pick up that specific variant that is visible in Omicron.

Q: How this calendar year has been for the entire industry and your company in particular?

A: It has been a mixed bag. Two-three things have happened like when COVID came - if seen just on the financial basis - obviously callings are there but at the same time, as we know, the government caps the prices. It is very difficult to cut costs and make a profit in these tests. So, it has been a challenging year from that perspective. Many rate cuts have been there but we have managed. If seen operationally, it is very difficult for the team because they work across the day and are under huge stress as every patient expect that their results are the most important thing, so they need it at the earliest, so, our health workers, especially, the COVID healthcare workers maybe you can see at the hospitals, labs or Metropolis than they work a lot and are under huge stress. So that has been a point of concern and one of the reasons we are seeing that because of that the cost of manpower is moving up in the industry. Competition has increased - as everyone thinks that there is a lot of money in COVID-testing - from the digital players and brick and mortar players.

Earlier also, we have seen such competition and it is not such that it is for the first time in the industry. But what happens in a short term is that cost moves up because there will be a manpower cost among others and that is a temporary disruption. So, whether it stays as a temporary disruption or in the long-term becomes a big issue time will tell but Metropolis is doing that we are evolving ourselves to ensure that we can manage all types of competitions and a brake is not applied to our growth. So, we are preparing for everything whether it is in terms of technology or something else.

Q: This means, you will have to face two big challenges in 2022, namely, the volume is declining as COVID-spread is not at that scale and the state governments are also slashing the test prices. So, let us know that has the prices of the kits that are used for tests are also coming down or they will put some pressure on the margins?

A: We are talking more about the COVID, actually our main business is non-COVID. If seen then every time when COVID scare comes it has an impact on the non-COVID because people stay at the homes, do not move out including to the office, do not eat food outside, and these are the things that spread other diseases and infection. Usually, we have seen that the non-COVID business, while it comes back to some normalcy although the normal growth that we used to see in the past has not returned because this scare comes in almost every two to three months, which impacts the non-COVID business in terms of growth.

So, I think, that is going to continue to be an issue and we have to watch for the next few months that how serious is this Omicron and the scale to which it will spread and what impact will it have on non-COVID. I am not that concerned about the COVID testing because we do not rely a lot on it financially because we do not have a huge margin on it, price capping continues to be there. We do it just to serve the world, it is not some great profit-making work for us. But we have more focus on non-COVID and 2022, hopefully, should be a good year for Metropolis because this year (2021-22) we have started 23-24 new labs and about 600-700 new collection centres. Next year and after it, we will do the same and totally we are starting 90 labs and 1,800 centres. So, we are going to expand a lot geographically plus we are starting a lot of digital business. In this combination, I think, the growth should be good.

Q: In the last two years (2020 and 2021), a lot of consolidation has been seen in the industry. Is Metropolis is looking forward to inorganic growth and do you have any good proposals that you can buy?

A: We have closed the acquisition of Hitech Diagnostic Centre (Hitech) in October 2021 and that has been one of the largest acquisitions in the industry and largest for us. So, right now, we are working on growing that and working on synergy integration. We get many proposals but we are seeing that in today's acquisition if people are not able to create the business in the right manner, i.e., on a quality basis then we are not interested in taking it. So, we are very selective about the acquisitions that should be done that will work financially and should be good quality wise and governance wise. In our industry, it is very difficult to get these three factors together along with scale this is why the companies who are working good on a pan-India basis are very few. So, we keep a lookout and as a good opportunity comes we will always look into it.

Q: Organically, how many new labs and centres will be opened in 2022?

A: In three years, between 2021-22 to 2024, we will start 90 new labs and 1,800 collection centres. So, our organic growth plan of geographical distribution is going to be very aggressive. We are also working aggressively digitally.

Q: Apart from India, Metropolis is present in seven other nations. Do you have any plans to increase your international presence in 2022?

A: Yes, of course, we are present in a few countries in Africa, like Kenya, Zambia and Ghana and a few other countries and I feel that we should get much deeper into these countries. We will also enter probably one or two new countries. Our business model is very much similar to India. The retail business and the B2B business that we have here is replicated there and are creating a brand as well as a business there. Actually, now, very fast we have become a very leading player in Africa in the last seven to eight years. So, we will continue to increase this business and make some investments there. We have appointed a separate CEO for our international business so that we can increase it remaining focused.

We are getting good opportunities from those markets as well but we are working in a focused manner, it is not so that we will enter 10-15 countries and start functioning. I think, chose 3-5 countries in Africa and go deep into it and become a leader there and this is our style.

Q: Why just in Africa, as you have named a few countries like Ghana and Zambia. Is it easy to enter these countries and it is a less regulated market or is pricing is good there? What is the main reason behind your specific focus on Africa?

A: Actually, Africa is a more regulated market than India. There is no regulation in India anyone can run a lab and the way he/she wants to run it, there is no governance. However, the governance is quite strong in Africa, so, it is not so easy to enter and start quality testing there. Things are checked there. Secondly, the prices are ok there, it is not that expensive, and there is competition. But I think that our USP is to really grow on the back of good signs. We see a lot that the people who come to our industry have quite commercial mindsets, they just feel that provide a discount, conduct a test, cut the cost, but they do not realise that the work they are doing is a matter of life and death of people, if a wrong diagnosis is provided then treatment will move in a wrong direction.

The trust and credibility that we have earned from doctors in India by doing quality work are being replicated in Africa. We are doing it in a proper way while others do not and that is where we win as others are in search of shot cuts like providing discounts and we do it in a hard way, which is to win the trust. So, the method of trust will make you run for a longer period while in discount you will face problems in short-term.

Q: From the perspective of investors and your shareholders tell us that in how many years will your company's revenue and production become double?

A: If you will have a look at the revenue growth of the last few years then we have been growing at approximately 16-17% for the last three to four years. Of course, there has been a lot of ups and downs due to this COVID but during the pre-COVID period, we were growing at a 16-17% year-on-year and profitability was growing faster than that. So, I would not like to give too much futuristic thought but would like to suggest to our shareholders to look at the past historic thought. In the long term if you will talk about the shareholders then our IPO was launched two-and-a-half years ago and our stocks have debuted at around Rs 910 per share and our listing price was Rs 880 and today we are about Rs 3,200.

So, we have created a lot of value for investors and shareholders. So, if you will consider it as a long term industry then healthcare is only going to grow in India and Metropolis as a leader will grow in India. And, if you will think it is long term, I think, it is a great industry to invest in for good returns but in short term, there will always be ups and downs in every industry. Earlier, you said, that people feel that they can go to any lab for routine check-ups then it is a misconception because the process has to be perfect whether it is a routine sugar test, CBC or a complicated test.

This misconception costs high to people because at times they go to labs that provide wrong results and then visit a doctor, where he says, what have you brought to me go to a good lab, which means you will have to bear a double cost for it. So, we always say that for a test always go to a good quality provider, when we go to the movie theatre we do not face any issue in spending Rs 500-1,000 on pop-corn and seat but we hesitate a bit when it comes to healthcare but I think that healthcare is the thing where we should make sure that we are not saving that Rs 500.