Dr. Lal PathLabs, India’s largest diagnostic chain, is exploring a significant acquisition to strengthen its presence in South India. A senior company official indicated that if a suitable asset is identified, the deal could range from ₹3,000 crore to ₹4,000 crore.
“We have approximately ₹1,000 crore in net cash, and we can leverage our balance sheet and equity; size won’t be a constraint,” said Ved Prakash Goel, the group’s CFO, in an interview with ET. He acknowledged that while there are opportunities in the market, valuation expectations are high.
As reported by economictimes, Dr. Lal is particularly interested in assets generating ₹300-400 crore in revenue, with the right mix, quality, and governance practices. The company has established an M&A team to assess potential acquisition opportunities.
“We are open to M&A opportunities in the South, having successfully acquired Suburban Diagnostics in the West. It took us about two years to integrate that acquisition, and now we have the management bandwidth and cash available,” said Shankha Banerjee, CEO of Dr. Lal.
Currently, South India is a weak area for the Gurugram-based company, contributing only 6% of its ₹2,227 crore revenue in FY24. In contrast, approximately two-thirds of revenue comes from Delhi NCR and the rest from North India, with the Eastern and Western regions each contributing 15%.
Dr. Lal’s last major acquisition was Suburban Diagnostics in October 2021, during a time when diagnostic valuations were high due to the pandemic. The company spent over ₹1,000 crore on Suburban, which provided a strong entry into the Western market, particularly Mumbai. However, some investors were concerned about the steep 18x EBITDA valuation, as Suburban’s margins were inflated by temporary Covid-related testing gains. Currently, Suburban’s EBITDA margin is about half of Dr. Lal’s 28% margin reported in Q1 FY25.