“Swasthfit has been a good, what I would call a bundle test portfolio, which has driven loyalty, but also attracted new patients. As we look forward, we are focused on sharpening the Swasthfit portfolio to make it more condition based, rather than being very generic,” says Bharath Uppiliappan, CEO, Dr Lal PathLabs.

Now, performance has been led this time by price hikes and volume growth. What is the expectation in terms of these two parameters down the line? Any price hikes planned?
We had another quarter of double-digit total revenue growth, and also the EBITDA came in very healthy at 26.1%. So cumulatively for the nine years, we have delivered double-digit growth and also very healthy EBITDA profile as we have been doing so far. In Q3, we saw the growth led by volume growth, patient visit growth of nearly 3%. We had a test growth of 7%. And obviously, the price and mix played the rest of the equation. It is our endeavour to continue to grow the patient visit and the test per patient portfolio as much as we can. And mix management is a very integral part of the revenue and profitability delivery program, along with patient centricity. Given this, we would focus on building the volume growth triggers forward. We have no price increase planned as of now, but as you would know that we are taking a price increase only on 50% of our portfolio. So we still have the opportunity left out to take the price increase if required, basis conditions, market conditions, and so on. But as of now, we are focused on looking at volume growth as the main driver of the business.
Swasthfit contribution, that stands, I guess, in a range of about 19% to 21%. In FY25, can we expect to look for a better number there or you believe the contribution will stay in the same range?
Swasthfit has been a good, what I would call a bundle test portfolio, which has driven loyalty, but also attracted new patients. As we look forward, we are focused on sharpening the Swasthfit portfolio to make it more condition based, rather than being very generic.

So we will have generic offerings on Swasthfit, but also supplement with non-chronic disease, critical management oriented bundle test portfolio, which is what a team is working on now and rolling out into the market.
From a contribution perspective, we believe that bundle portfolio offers immense value to the patients, to the referring clinicians, and also to us from an operating leverage perspective.

So we will continue to build the bundle test portfolio, not only in Swasthfit, but also in super specialty segments. For example, how do we kind of give a seamless journey on cancer care or autoimmunity or reproductive diagnostics? So bundle test is an across the portfolio, across the spectrum kind of focus for us, not just restricted to a few tests and so on. So yes, on the whole bundle test portfolio contribution will move up in the years to come as well.

Right, and with pricing pressure now behind and both offline and online players now high prices, are you worried about competitive intensity? Any change that you are witnessing in industry dynamics now, being the largest player?
We always believed, and we have said this in the past, that pricing is not the only lever by which someone can gain market share or lose market share. This is a service business and one where medical results and medical quality, medical trust rules the roost. So it is good that all the other players have realised that doing deep discounting is really not helpful to sustaining the business on the longer term. So that is something which we have always maintained and looks like it is playing out now. From our perspective we are focused on geographic expansion, we are focused on making tests more affordable. So for us pricing lever is not the primary lever to work on but looking at geographic expansion, looking at medical excellence and pricing yes will be used as and when appropriate so that the differential to market is not too high. But currently we are focused on driving the volumes in the business. Right and since you have plans to expand into tier 2 as well as 3 cities, how is the realisation and operation cost going to pan out for you?
A very good question. In fact, we are very encouraged by the response we are getting in tier 3-4 cities. We announced a 20 new lab program in these towns. We are also going to beef up with collection centres and other market activation programs. Now while the realisation in these towns may be slightly lower but we believe two things will happen. One is that the scale will give us the margin leverage which we have always strived for and delivered on.
So we believe that the opportunity size is so large here that any realisation what I would call difference vis-à-vis the larger cities will be made up. The second thing to be noticed is that as these cities progress in their economic journey, they will also start to order more sophisticated and higher end tests as a result of which the realisation will come back to what you would see in a tier 1 or a large metro city.

So we are very hopeful that currently we will operate on scale basis and that will give us a margin profile and we do not expect to drop the margin profile because of going to tier 3-tier 4 cities. I want to be very clear on that. In fact the volume available there will make up for any realisation difference and so as to the lower cost of operations in those cities. So net summary, we are going deeper into tier 3-tier 4 cities without dropping our margins.

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