India’s second-largest pathology lab chain, Metropolis Healthcare, is strengthening its foothold in North India with another acquisition. The diagnostics player announced Monday that its wholly-owned subsidiary, Metropolis Clinical Pathology Pvt. Ltd will acquire Agra-based Scientific Pathology through a business transfer agreement.
Scientific Pathology, which has three labs and 11 collection centres, is a market leader in Agra. The company said in a release that the acquisition will make Metropolis the second-largest organised player in Western Uttar Pradesh.
“Just last year, we actually set about opening eight labs in UP, and 80 collection centres as a launch into UP, and this Agra acquisition will be a very important piece of it because it allows us to acquire a good quality business in Agra, grow that business and then use that Agra base to grow across the region,” Ameera Shah, promoter and executive chairperson of Metropolis Healthcare, told Mint.
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The firm plans to leverage the lab’s strong local brand to establish a presence in the market and scale it up.
“While we will add another 10-15 centres in Agra, the idea will be to go outside Agra as well into all the smaller markets and across Western UP,” Shah said.
The acquisition will take place through a Business Transfer Agreement (BTA). The company said in a regulatory filing that the transaction is expected to be completed within 45 days from the date the BTA is signed.
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The consideration for the acquisition will range between ₹55 crore and ₹83 crore, determined at 12.2x of the adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) over a defined assessment period.
North India focus
This comes months after Metropolis announced its acquisition of Delhi-NCR-headquartered Core Diagnostics, a prominent player in India’s specialised diagnostics sector, for ₹246.8 crore. Both acquisitions align with Metropolis’ focus on growing its presence in North India.
The company continues to assess further inorganic opportunities in North India. “The overall goal is to build a string of pearls across North India by partnering with very interesting, ethical, good quality assets and integrating them well to create a much stronger presence,” Shah said.
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The company currently gets 8-9% of its overall revenue from North India. With the two new acquisitions, it is expected to contribute 18% of its overall revenue in the next fiscal year, Shah said.
“So North India will become a much more meaningful pie for us,” she said.
The company expects this to drive its margin expansion and revenue growth next year. “While we are already organically growing approximately 13%, these acquisitions will give us a big jump forward for next year,” Shah said.
In Q3FY25, Metropolis reported a margin of 22.3%. Driven by this expansion, the company plans to hit its pre-covid margins of about 26% in the next 18 months.
Leveraging local expertise
Dr Ashok Kumar Sharma, the founder and proprietor of Scientific Pathology, will hold a 10% stake in the company and continue to spearhead the operations. “He will be the face of the lab and continue to work with us for many years to come,” Shah said.
“In these kinds of partnerships, while Metropolis brings many things to the table, we like to leverage the promoters, local relationships, their knowledge, etc,” she added.
Currently, 90% of the Agra-based lab’s business is business to consumers (B2C), with mostly walk-ins or doctor-referred patients. Metropolis plans to scale this up and grow it into a business to business (B2B) business by adding infrastructure, upgrading test offerings and technology, and increasing partnerships with hospitals and other labs.
In FY24, Scientific Pathology recorded a turnover of ₹26 crore.
