Metropolis Healthcare buys Hitech Diagnostic for Rs 511 cr

Mumbai-based diagnostic services provider Metropolis Healthcare today announced that it has agreed to buy Chennai-based Hitech Diagnostic Center for a cash consideration of Rs 511 cr. Hitech promoters will invest in Metropolis as part of the deal.

Metropolis did not specify the price at which it would allot the 4.95 lakh shares that it will issue as part of the deal, but said it would be done as per Section 164 of SEBI (Issue of Capital and Disclosure Requirements) Regulations.

Assuming that the shares would be issued at around the current market price of Rs 2,167 each, that would mean around Rs 107 cr out of the Rs 511 cr paid to the promoters of Hitech would come back Metropolis in the form of an investment.

Since the total number of shares outstanding for Metropolis at present is around 5.11 cr, Hitech promoters would also end up with a stake of just below 1% in Metropolis after the transaction.

Metropolis MD Ameera Shah said the acquisition is squarely focused on increasing her company’s market share in South India and said the acquired company observes high levels of quality and service.

“Our objective with the acquisition is to increase our market share in focus cities of Chennai and Bengaluru and become leaders in some tier 2 towns in South India.

“We will capture the mid-segment of the market, increase our B2C revenue contribution and leverage scale benefits through cost synergies. Metropolis enjoys a good track record of turning its acquisitions to strong and sustainable business and we aim to replicate the same,” she said.

Established in 1986, Hitech Diagnostic Centre is a well-known Diagnostics laboratory chain in Tamil Nadu, Karnataka, Kerala, Andhra Pradesh and Pondicherry.

It currently has 31 laboratories, including 3 accredited by NABL and ICMR, and 68 collection centres.

It is the second largest player in Chennai behind Metropolis and is a leader in non-Chennai markets in the state of Tamil Nadu.

Hitech also has a significant market share in Bengaluru, though it is not comparable to its position in Tamil Nadu.

The company caters to the mid-segment of the market and has a large retail footprint.

It has a menu of 1,100+ tests ranging from routine to molecular & genetic assays, compared to over 4,000 test profiles offered by Metropolis.

The company reported revenue of Rs. 83.3 cr last year, and has similar profit margins to Metropolis.

There has been a 50% growth in revenue in the current financial year due to the pandemic, said Metropolis, quoting the Hitech management.

For the year ended March last year, 59% of Hitech’s test menu was in the segments of Blood Biochemistry and Endocrinology.

“The acquisition will allow Metropolis to increase its B2C business in focus cities of Chennai and Bengaluru and benefit through optimization of operational costs in the areas of procurement, supply chain, administration and support resource, laboratory network and back office infrastructure. It will further allow Metropolis brand to make deeper inroads in different customer segments across key markets in South India,” said the Mumbai-based company.

Dr. Ganesan Subramanian, founder and promoter of Hitech, will be part of Metropolis for next “few years” to enable a smooth transition and integration, the company said.

“We share similar business ethos as Metropolis and focus on quality, accuracy, and highest level of customer service. We believe, Metropolis is the right brand to carry forward the legacy of Hitech,” Ganesan said.