Transaction:
- Metropolis Healthcare Limited, India’s second-largest pathology chain acquires 100% stake in oncology-focused diagnostic services provider Core Diagnostics for Rs 246.8 Crore.
- The acquisition will take place through a combination of cash and stock, with 55% of the transaction in cash around Rs. 135.76 crore, funded through internal accruals and debt, and 45% through a preferential issue and allotment of equity shares of the company.
- After the acquisition is completed, Core Diagnostics will become a wholly owned subsidiary of Metropolis Healthcare.
About Core Diagnostics Private Limited:
- Founded in 2012, the company specializes in diagnostic services, particularly in the field of oncology operating in 200+ cities, 9 labs and provides 1300+ high end tests in India.
- It also operates through franchisee network across 10+ countries in Asia, Africa, and the Middle East.
- The company was backed by PE firms like Artiman Ventures, F-Prime Capital Partners and Eight Roads Ventures.
About Metropolis Healthcare Limited:
- Established in 1981, headquartered in Mumbai, the diagnostic chain has a strong presence in South and western India, 3 union territories and 650+ towns in India offering 4,000+ advanced tests for the diagnosis of cancer, neurological disorders, infectious diseases and various genetic abnormalities.
- It operates through a robust network of 190+ laboratories, 4000+ collection centers across 7 countries including India, Sri Lanka, Uganda, Zambia, Kenya, Mauritius and Ghana.
Rationale:
- Geographical Synergy: The acquisition will help Metropolis leverage Core Diagnostics’ existing relationships with 1600 cancer specialists and tie-ups with oncology hospitals, expanding its footprint in northern and eastern India.
- Specialized Capabilities: It will enhance Metropolis Healthcare’s portfolio in advanced cancer testing, and boost its market share in the specialized diagnostics market with the addition of high-end testing, and also oncology testing contribution to rise from 4% to 10% and specialized test contribution to 41% from 37% of Metropolis’s revenues.
- Cost Synergies: Merging of overlapping labs, procurement efficiency, logistics synergy and overhead cost optimization will lead to better EBITDA levels.
- Cross Selling: Wide opportunity to diversify the portfolio and reach a broader client base by offering non-oncology tests to Core diagnostic hospital and labs, while cross-selling to Core’s specialized oncology tests to MHL’s clients.
- Core Diagnostics registered revenue of INR 110 crore in FY 2023-24. The deal was valued at 1.6x its FY25 (E) revenue and 2.2x of FY24 revenue.
- In Oct 2021, Metropolis Healthcare acquired Chennai based Hitech Diagnostic Centre (Hitech) and its subsidiary Centralab Healthcare Services, based in for ₹ 636 crore.
- The Indian cancer market is rapidly growing and is expected to expand at a CAGR of 17.5% from 2023 to 2028, driven by rising cancer incidences, technological advancements, improved healthcare access, and increased awareness.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
Disclaimer:
This material has been prepared by the personnel in Vora Corporate Finance which is Investment Banking arm of Vora Management Consultancy Private Limited and looks after Mergers & Acquisitions (M&A), Private Equity (PE), Fund Raising, Debt syndication and Valuations and is based out of Ahmedabad, Gujarat, India. Any views or opinions expressed herein are solely that of individual authors and may differ from view of Vora Management Consultancy Private Limited. This material is proprietary to Vora Management Consultancy Private Limited and is for your personal use only. Any distribution, copy, reprints or forward to others is strictly prohibited.
This material captures the information based on information available in the public domain, public announcements and sources believed to be reliable. Analysis contained herein is based on publicly available information and appropriate assumptions. This material is intended merely to highlight market developments and is not intended to be comprehensive and does not constitute strategic, investment, legal or tax advice. In no event Vora Management Consultancy Private Limited be liable for any use by any party or for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you for evaluating any transaction.