Deal includes cash consideration of Rs. 511 crores, acquisition expected to complete within three months, and will strengthen Metropolis’ position as the second largest diagnostics company in India and largest brand in South and West India
Metropolis Healthcare’s Board of Directors has approved the acquisition of 100 per cent equity of Dr Ganesan’s Hitech Diagnostic Centre (Hitech) in a combination of cash and stock deal. The entity is a debt free company and the acquisition is expected to be completed within three months. The acquisition s expected to strengthen Metropolis’ position as the second largest diagnostics company in India and largest brand in South and West India.
Cash consideration will be Rs. 511 crores and Metropolis will issue up to 4,95,000 equity shares of Face Value Rs.2/- each on preferential basis, subject to shareholders approval, to the promoter group of Hitech. The cash consideration will be funded through internal accruals and debt of up to Rs. 300 crores.
Dr. Ganesan, promoter and founder, will be part of the leadership team for the next few years to enable a smooth transition and integration with Metropolis.
The acquisition will reportedly allow Metropolis to increase its B2C business in focus cities of Chennai and Bengaluru and benefit through optimisation of operational costs in the areas of procurement, supply chain, administration and support resource, laboratory network and back office infrastructure. It will further allow the Metropolis brand to make deeper inroads in different customer segments across key markets in South India.
Metropolis will get access to 31 laboratories including three NABL and ICMR accredited laboratories and 68 collection centres of Hitech, spread across the states of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh and the Union Territory of Pondicherry.
Established in 1986, Hitech is the second largest player in Chennai behind Metropolis and is a leader in non-Chennai markets in the state of Tamil Nadu. It is a significant player in Bengaluru market. Catering to the mid-segment of the market with a large B2C footprint, it has a test menu of 1,100+ tests ranging from routine to highly impenetrable molecular and genetic assays. In FY20, 59 per cent of the test menu was towards blood biochemistry and endocrinology. Revenue for FY20 stood at Rs. 83.3 crores having an EBITDA margin profile similar to Metropolis. For 9MFY21, as per management estimates, the revenue growth has been ~50 per cent+ with higher EBITDA margins partly aided by the current pandemic situation.