One can’t take chances in the illness segment. Ranjan says the diagnostics sector can be divided into two main segments: one, where testing is done related to an illness, which is 90% of the market and second, testing related to wellness (preventive measure) which is 10% of the market. Moreover, turnaround time, accuracy and quality of diagnosis matter more than pricing, says Rakshit Ranjan, portfolio manager at Marcellus Investment Managers. Interestingly, IIFL Securities, in its Q1FY23 earnings review report, has observed that while the competitive intensity has been severe for the past 12-18 months, it hasn’t manifested into any pricing pressure for Dr Lal Pathlabs as evidenced from the company’s gross margins sustaining at 77%, similar to that of pre-covid levels. The company may not have slashed prices but has kept them static for the past few years. Manchanda agrees that prolonged increased competition will impact its business, but believes the pie will get bigger as the shift happens from the unorganized to the organized space. They are much cheaper than Dr Lal, but haven’t been able to snatch its market share," says an analyst who requested anonymity. “Thyrocare or Metropolis have been active in Dr Lal’s home markets for 15-20 years now. There is a niggling concern in the market too whether such price cuts are sustainable. We won’t charge ₹2,000 premium when others are charging ₹100, but our pricing will be comparatively higher along with more value," says Manchanda. The other one is moving faster but charging a premium. One is moving slowly, but offering a service at a discount. The product contributed 21% to its revenues, up from 15% in 2020. Like the Swasthfit plan, which is a bundled product in different packages. It has shifted focus on cost-effective offerings. Yet, the company has re-strategized its pricing without taking the race right to the bottom. People care for quality more than the money when they have to get medical tests done," he says. You don’t go to a diagnostics lab every month or even year. It is not a high-frequency contact business where price elasticity matters. “You cannot compare telecom with diagnostics. In a price-conscious country like India, will the corporate biggies eventually hold sway in terms of pricing? Though these tests were offered under a limited period promotional scheme, it posits a much larger question. According to the ICICI Securities report, Tata-backed 1mg offered four routine tests (Thyroid, Lipid, Diabetes and Liver profiles) at flat ₹100, when the industry average was ₹500-600 per test. It’s a situation akin to the big telecom battle when Jio disrupted the industry with its price cuts. The ad spend went up from ₹31 crore in 2021 to ₹37 crore in 2022.Īnother game changer, or rather irritant for players like Lal Pathlabs, has been the price wars. The company has upped its spend on marketing and digital growth. What all will sustain upside in Apollo Tyres stock? Most are happy with digital world, except these Indians What to do when magical 60:40 formula doesn't work Shiprocket raises funds, joins unicorn club We don’t want to lose on top-of-the-mind recall," says Om Prakash Manchanda, the managing director. We have to accept that brand awareness for many brands has gone up. “The competitive intensity is much higher than what it was a couple of years ago. Pharma retailer MedPlus is another serious entrant while there has been much buzz over Adani Group and Apollo Hospitals eyeing a stake in Metropolis Healthcare.Īmid this churning, Dr Lal Pathlabs knows that while it can bank on its brand value, it can’t be complacent either. Reliance Group has acquired e-pharmacy Netmeds, which is expected to bolster its diagnostic business. Tata Group launched its own diagnostics wing, Tata Medical and Diagnostics, in 2020 and also acquired e-pharmacy 1mg a year after. Lupin Diagnostics, which set up its National Reference Laboratory in Navi Mumbai, is looking for franchise partners and is aiming at a slot among the top five players. Even corporate biggies are sniffing potential in this space. Several new players from the pharma industry (Lupin, Torrent Group, Mankind Pharma), hospital chains (Apollo Hospitals) and digital start-ups (Tata1mg, Healthians) are making inroads.
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