According to consulting firm PricewaterhouseCoopers, the diagnostic industry in India is expected to grow to a whopping $17 billion in the next couple of years. The big four players, namely Thyrocare Technologies, Religare promoted SRL Diagnostics, Dr Lal Pathlabs and Metropolis have around 10% market share, whereas 90% of the market is dominated by unorganised players. Thyrocare is one of the leading pan-India diagnostic chains. The IT enabled laboratory functions 24x7, ensuring error free processing of 40,000 specimens and over 2,00,000 clinical chemistry investigations per night. This unmatched speed factor is achieved through a combination of air cargo logistics and IT enabled bar coded system that ensures a turnaround time of 4-8 hours for processing of samples that arrive at any time of the day or night. Their profile of tests are administered under the “Aarogyam” brand name with a focus on providing quality reports at affordable costs to laboratories and hospitals in India and others internationally. The initial public offering (IPO) of Thyrocare Technologies Ltd in a price band of Rs 420-446 was well received by all kinds of investors and oversubscribed 74 times last month. The stock debuted on the bourses at Rs 665 per share on the first day of listing against its issue price of Rs 446. Sector analysts who were comparing valuations of Dr Lal Pathlabs with Thyrocare reported that Dr Lal Pathlabs followed the branch model while Thyrocare follows the franchisee model. Since the latter have a 50:50 arrangement with their franchisee, they knock off that much from the revenue numbers. Hence, even if their revenue seems to be less compared with Dr Lal Pathlabs, the margins are double. Thyrocare Technologies could be an amazing way to participate in this structural story. The company stock currently trades on the Indian bourses at Rs 600 and is a good buy for a price appreciation of 40% in one year time frame. Returning to our stock markets, the earning season has been better than expected this quarter and if the monsoons are good then the market may take off in an upward momentum. There are two significant events taking place next week across the globe namely, Brexit and Federal Reserve’s monetary policy meetings. Any negative sentiment may bring corrections in the global markets. While our markets are fairly valued, it would be a better strategy to wait for some time and then buy on dips.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.