Diagnostic Companies poised for 10-11% revenue growth in FY25: CRISIL

The projected rise in revenue comes on the back of an estimated 8% growth in FY24

Diagnostic companies are poised to register 10 to 11 per cent growth in revenue in financial year 2025 due to a higher number of patients and improving revenue per patient, according to a study by ratings agency CRISIL.

The projected rise in revenue comes on the back of an estimated 8 per cent growth in financial year 2024.

“While geographic expansion by established players into Tier-II and Tier-III cities will drive higher patient volumes, growing demand for comprehensive preventive health packages will lead to higher realisation per patient,” the agency added.

Speaking on the reasons for companies expanding towards smaller cities, Poonam Upadhyay, Director, CRISIL Ratings said that existing diagnostic players are seeing stagnant growth opportunities for routine tests (accounting for 55 per cent of revenues) in metros and urban centres due to stiff competition from e-pharmacies and labs attached to hospital chains.

“As a result, they are looking to expand into the untapped Tier-II, III, and IV cities and increase their customer base to drive volumes. The increase in collection centres at these locations will also lead to better utilisation of existing test labs,” she said.

Crisil’s outlook also suggests that diagnostic companies will be able to keep steady operating margins in financial year 2025, due to an increase in premium wellness packages which include preventive health checkups.

Preventive health checkups received a boost post-Covid-19 pandemic as companies put a renewed focus on health awareness.

Diagnostic companies have bundled various tests into curated wellness packages tailored for different genders, age groups, and consumer profiles to facilitate preventive health checkups.

“This has enabled them to charge a premium, leading to an increase in spend per patient. Notably, the share of this segment is expected to reach around 22 to 23 per cent in financial year 2025, up from around 18 to 20 per cent in financial year 2024,” the agency added.

Addressing the rising share of higher margin health packages, the agency said that such packages are expected to account for nearly one-fourth of total revenues, ensuring that operating margins remain steady at 24 to 25 per cent in this fiscal, despite continuing brand promotional expenditure.

“With internal accruals sustaining at healthy levels and capital expenditure (capex) spend remaining modest, reliance on external debt will be low, ensuring that balance sheets remain strong and support credit profiles of diagnostic players,” the study stated.

Crisil's study is based on ten diagnostics companies in its sample set, including five pan-India players such as Dr Lal PathLabs, Metropolis Healthcare, Agilus Diagnostics, Thyrocare Technologies, and Vijaya Diagnostic Centre.