Metropolis Healthcare adds Core strength to specialty cancer diagnostics

Buys 100% stake in Core Diagnostics through cash, stock for Rs 247 crore

India’s second-largest pathology laboratory (pathlab) chain, Mumbai-headquartered Metropolis Healthcare, announced on Monday that its board approved the acquisition of Delhi-National Capital Region-based specialised cancer diagnostics player Core Diagnostics, valuing Core at Rs 246.8 crore.

 

Metropolis will acquire a 100 per cent stake in Core through a combination of cash and stock, financing 55 per cent of the transaction in cash and 45 per cent through an equity swap, totalling Rs 246.8 crore.

 

Core registered revenue of Rs 110 crore in 2023-24. Ameera Shah, promoter and executive chairperson of Metropolis, said that the deal values Core at around 1.6 times its estimated revenue for 2024-25 (FY25).

 

“In the first half (H1) of FY25, Core posted revenue of Rs 59 crore, and it is projected to end the financial year with Rs 120-122 crore,” she told Business Standard.

 

“The equity issuance is subject to shareholder approval, and the acquisition is expected to be completed within 60 days,” Metropolis said.

 

Metropolis stock was up 2.4 per cent on the BSE on Monday.

 

Super-specialty tests now constitute 37 per cent of Metropolis’ revenue, and with Core’s acquisition, this would increase to 41 per cent. Oncology tests currently account for 4 per cent of Metropolis’ revenue, which will rise to 10 per cent. Metropolis posted a revenue of Rs 1,207 crore in 2023-24 and Rs 663 crore in H1FY25.

 

Shah added that Core, which was backed by private equity firms like Artiman Ventures and Eight Roads, is ‘marginally profitable’ and has single-digit earnings before interest, tax, depreciation, and amortisation (Ebitda) margin in FY25. Core has achieved a 22 per cent revenue compound annual growth rate (CAGR) over the past three years.

 

Shah explained that lab chains focused on super-specialised tests are often sub-scale. “Once under our umbrella, we will find both revenue and cost synergies, and we can grow the Ebitda. In 2025-26, which will be the first full year after the acquisition, we aim to grow Ebitda by 13-14 times,” Shah said.

 

She added that for the first year, both companies will operate under their own brands, and in the second year, Core will operate under Metropolis’ brand for oncology testing.

 

Founded in 2012, Core operates in 200 cities in India, with eight labs, touchpoints in 200 locations, and connections with 1,200 hospitals and midsized labs. Metropolis hopes to cross-sell its tests through Core’s network.

 

Shah said that Core connects with 1,600-1,700 oncologists, providing very deep coverage, and Metropolis will gain access to these specialist doctors, which would have otherwise taken them four to five years. “We could have also developed specialised cancer tests in-house, but that would have taken a couple of years. Plus, we also gain market share in North and East India, where Core is strong,” Shah said.

 

Core offers over 1,300 high-end tests, with a primary focus on cancer, serving more than 6,000 specialty prescribers, including 1,600 top cancer specialists. It has over 350-400 specialised cancer tests and about 150 super-specialty cancer tests. Metropolis offers over 250 cancer tests in its 4,000-test menu.

 

With roughly 1.4 million new cancer cases and nearly a million deaths annually in India, there is a critical need for advanced cancer testing in the country. Shah said that demand for cancer testing is expected to expand at a CAGR of 17.5 per cent from 2023 to 2028.

 

Surendran Chemmenkotil, chief executive officer (CEO) of Metropolis, said: “With the majority of Core’s revenue coming from North and East India, this acquisition provides an opportunity to connect with leading hospitals in these regions. It enables us to cross-sell Metropolis’ comprehensive range of tests and services while offering Core’s advanced cancer testing to our existing customers.”

 

Core’s team of about 500 employees will join Metropolis, including its CEO Dinesh Chauhan, who will continue to head Core under the Metropolis umbrella.

 

Chauhan said that this “new chapter” with Metropolis is “exciting” and “deeply meaningful”.

 

“Core began in 2012 as Zoya Brar’s visionary dream, and as a team, we’ve built a foundation of hope in advanced cancer testing. With Metropolis’ reach and expertise, we are ready to take a bigger leap, touching more lives and making a lasting difference in healthcare,” Chauhan said.

 

VITAL SIGNS

 

•          Cash and stock deal values Core at 1.6x FY25E revenues at Rs 246 crore

•          Metropolis aims to grow Core’s Ebitda by 13-14x by FY26

•          Metropolis gains market share in North and East India and access to 1,600 oncologists

•          1.4 million new cancer cases in India every year

•          Cancer testing estimated to grow at 17.5%