dr lal pathlabs ltd share price Management discussions

Economic overview

Global economy

In the fiscal year 2023, the global economy encountered several headwinds, including geopolitical conflicts and mounting inflationary pressures, which had far-reaching effects on supply chains and impacted global trade and employment. The Russia-Ukraine war triggered further economic upheaval, leading to food insecurity concerns in several developing nations. Moreover, high inflation eroded real incomes, resulting in a global cost-of-living crisis and pushing millions into poverty and economic hardship. However, there are early indicators offering hope about a possible rebound for the global economy, especially in emerging markets and developing economies (EMDEs). The EMDEs have demonstrated remarkable resilience amid global economic turmoil. Their demographic dividend, combined with sustained growth and attractive investment opportunities, makes them an attractive destination for businesses seeking expansion. Furthermore, substantial investments in infrastructure in emerging markets have spurred growth opportunities for various industries.1 In the years ahead, advanced economies are anticipated to experience a resurgence owing to the fiscal and monetary policies implemented by central banks. A stronger boost from pent-up demand in numerous economies or a faster fall in inflation is likely in the course of 2023.

Indian economy

The Indian economy has emerged as one of the fastest-growing major economies, according to estimates by the National Statistical Office (NSO) in FY23. Based on NSOs latest advanced estimates, India has registered a growth of 7.2% during the year under review2. This growth can be attributed to robust construction activity aided by increased infrastructure investment both by the Central Government and state governments, which paved the way for large-scale employment opportunities. The domestic economys growth is also driven by rising private consumption, despite a projected headline inflation rate of 6.8% for FY233. Private consumption accounted for 58.4% of the GDP in Q2 of FY23., reflecting reviving consumer sentiment.

Looking ahead, the Indian economy is anticipated to witness considerable expansion, supported by increased capital investment, a rebound in export trade post-pandemic and a reduction in global uncertainties. The strong rebound of the MSME sector, facilitated by government schemes bodes well for economic growth. The Indian economy is expected to benefit from increasing foreign investment and exports. However, challenges such as inflation and rising oil prices may also impact the economys performance in the long run.4

Industry overview

Indian healthcare sector

Indias healthcare sector has been growing at a compound annual growth rate (CAGR) of 22%5 driven by several factors including population demographics, a growing middle class, higher earnings, greater health awareness and an increase in lifestyle disorders. The increasing prevalence of non-communicable diseases (NCDs), making up 50% of the disease burden and 60% of total deaths in India6, is creating a demand for advanced healthcare services. The Indian healthcare market is expected to reach USD 367 billion by 20237 . Due to digitisation, innovation and novel hybrid business models that incorporate conventional and technology companies, the sector has experienced substantial growth over the last five years. The pandemic also sparked a long-lasting change in behaviour towards personal hygiene, health insurance, fitness and nutrition, as well as health surveillance and physical examinations. Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), which was allocated Rs 7,200 cr in FY24 (12% more than Rs 6,412 cr in 2022-23), highlights the governments focus on extending the AB-PMJAY health coverage to more than 400 million additional people who are not currently covered under any government or private health insurance scheme.8 Rising insurance coverage, the growth of telemedicine and government initiatives like e-health, tax benefits and incentives have also contributed to the development of Indias healthcare market. Investments of over USD 200 billion are expected in medical infrastructure by FY 2024, resulting in improved healthcare facilities nationwide.

Government initiatives

In the recently released Union Budget 2023-24, the Government has encouraged the deployment of Artificial Intelligence (AI) in research and innovation in India. This targeted focus on the AI sector, which has strong connections to diagnostics has the potential to bring about substantial changes in the industry. The governments initiative to establish three AI centres of excellence in leading Indian institutions will contribute to the development of sustainable healthcare solutions. Considering the critical role of AI research in diagnostics, these centres will aid in the creation of indigenous products for the industry9.

Ensuring public health is a key focus area of the Indian government. The Government has allocated an amount of Rs 88,956 crore in the Union Budget for the year 2023-24 for healthcare expenditure which marks a 2.71% increase compared to the previous year14.

The Indian government has undertaken numerous initiatives to ensure universal healthcare coverage and insurance for its citizens through Ayushman Bharat - Pradhan Mantri Jan Aarogya Yojana (AB-PMJAY). The AB-PMJAY scheme aims to provide benefits to an estimated 500 million beneficiaries, granting each family up to Rs 5 lakh each year to cover hospitalisation expenses. The programme is recognised as the one of the largest government-funded healthcare initiative and has been allocated Rs 7,200 crore in the India Budget 2023-2410.

Indian diagnostic sector

Indias diagnostic sector has witnessed unprecedented growth in recent years. The pandemic has compelled companies to cater to the increasing demand for testing, faster results and precise diagnosis. The rapid adoption of technology, growing middle-class population, greater awareness of preventive healthcare and increased expenditure on healthcare are all acting as tailwinds for this sector. Within the diagnostics market, pathology and radiology are the two main segments. The industry is highly fragmented, with unorganised standalone centres catering to approximately half of the market share, while hospital-based diagnostics centres hold a 37% share11. Pathology testing, the preferred choice for diagnosing a wide range of diseases, accounts for nearly 60%12 of the market, while radiology testing, which includes procedures like X-rays and ultrasounds, represents a little over 40% 13.

The size of Indian diagnostics estimated at $ 10 billion in FY 20 is expected to reach $ 20 billion by FY26. Standalone centres and hospitals based labs account for 85% of this market. National and Regional diagnostics centre accounts for 15% of the market share.


The outlook for the healthcare and diagnostic market in India appears promising with strong revenue growth projected for the upcoming years. It offers attractive margins and has room for expansion. Specialised tests and pathology are driving growth. The industry is fragmented however, it presents opportunities for new business models. Medical device manufacturers have also uncovered growth prospects in India. With considerable capital expenditure for cutting-edge diagnostic facilities, the nation has also emerged as one of the foremost locations for high-end diagnostic services, serving a larger section of the populace. Future demand for healthcare services is anticipated to increase due to factors such as improved income levels, an ageing population, rising health awareness and shifting attitudes towards preventive healthcare.

Risks and concerns

Regulatory headwinds

The diagnostics industry in India is subject to existing regulations and guidelines set forth by the Central Government and State governments. These regulations ensure that the industry adheres to specific standards and practices, thereby safeguarding the best interest of patients. In times of seasonal outbreaks or pandemics, the Government may intervene to protect public health. The Company leaves no stone unturned to ensure compliance with all applicable regulations. As the Company is part of a largely unorganised industry, it is aware of the unique challenges that may emerge due to sudden changes in regulations. However, its well-established infrastructure and robust operational capabilities position it favourably to navigate such changes and restore normalcy faster.

Evolving competition

The diagnostics industry in India is predominantly unorganised, presenting a significant opportunity for businesses to enter the market. The industry has witnessed the emergence of online portals and web aggregators, who have integrated themselves into certain aspects of the diagnostic business value chain. To gain traction faster, these new players are not hesitant to leverage pricing as a marketing strategy.

In response to the intense competition, the Company has adopted a comprehensive approach that focuses on brand building and network expansion. By prioritising the delivery of high-quality services, it has managed to differentiate itself from industry peers. Additionally, the Company has made consistent investments in digital technologies, which has enabled it to create a distinct identity in the market.

Investment in building capacities and newer tests

The Company has been expanding its laboratory network to meet the growing demands of existing and emerging sampling requirements. This includes establishing patient touch points through franchisee partnerships, integrating home collection services, and continuously evaluating and introducing new tests to its portfolio. These initiatives ensure that the Company remains agile, adaptable, and well-positioned to meet the demands of its customers while maintaining a competitive edge in the diagnostic sector.

Technology paradigm

In certain situations, diagnostic testing is becoming more accessible to a wider population. Point-of-care testing is gaining popularity due to its affordability and convenience. While the Companys established testing infrastructure provides comprehensive and reliable diagnostic outputs, it recognises the potential of integrating such technologies into its service delivery framework. The Company is actively exploring ways to incorporate these advancements to enhance its offerings and improve the patient experience. At the test menu level, a dedicated team of specialists plays a crucial role in evaluating and advising on new developments. This diligent approach ensures that the Company stays at the forefront of technological advancements in the field of diagnostics, providing accurate diagnoses and trend analysis for patients. The integration of advanced diagnostic tools and techniques allows for improved patient care and reinforces the Companys position as a trusted provider of accurate and reliable diagnostics.

Further, we are actively managing the risks, emanating from Technology also. To that end, weve deployed cutting edge cyber security technologies using defence-in-depth model. Further, we periodically perform the cyber security assessments across our IT ecosystem to evaluate the control effectiveness. In addition to that, we follow industry reputed Information Security Mgmt System such as ISO 27001.

Other risk factors

The Company has been diligent in monitoring and addressing risk factors associated with its operations since its IPO in December 2015. It has implemented robust mechanisms to ensure ongoing mitigation and is vigilant in identifying any potential challenges. Through regular assessment and analysis, the Company strives to safeguard its operations and maintain a resilient and sustainable business model. This commitment to risk mitigation underscores the Companys dedication to maintaining a secure and stable foundation for its stakeholders and ensuring long-term success.

Targeted business expansion and future strategy

The Company reached a significant milestone in January 2023 with the inauguration of its Reference Lab at Vidyavihar, in Mumba

i. This advanced facility has not only expanded high-end testing capabilities but also holds the distinction of being the first private lab in West India to feature a BSL Level-III biocontainment lab. By establishing this advanced facility, the Company reaffirmed its commitment to delivering cutting-edge diagnostic services. Dr. Lal PathLabs has expanded its National Reference Lab in Rohini, Delhi, by adding a second electron microscope, an upgraded lab information system and advanced tools such as artificial intelligence and data mining. These technological advancements have substantially enhanced the accuracy and efficiency of diagnostic outcomes. Staying true to its culture of innovation, the Company consistently expands its test menu to offer a comprehensive range of diagnostic solutions. Moreover, efforts are underway to widen the franchise network and extend the reach of patient service centres, ensuring more individuals have access to high-quality healthcare services. With 277 labs across the country, including 70 labs in Tier-III towns, the Company has established a strong geographic footprint. The Company is investing in scalable and profitable digital programmes to improve healthcare accessibility in Tier-III and Tier-IV cities by setting up 10 to 15 labs in these cities. Recognising the increasing importance of digital solutions, the Company is integrating medical excellence with digital and analytical capabilities to enhance the patient journey and elevate the overall customer experience. This commitment to digital transformation is reflected in the launch of Chips, a recommendation engine and patient wallet. These initiatives will provide personalised and scalable digital customer relationship management programmes. To optimise revenue growth and gain market share in the Western region particularly in Maharashtra. The Company will execute a dual-brand strategy, with Dr. Lal PathLabs focusing on the B2B side of the business and Suburban Diagnostics, its subsidiary, expanding its footprint in the B2C segment. By prudently investing in consumer-facing elements such as technology integration and home collections, the Company aims to expand its reach in West India and maximise capacity and infrastructure utilisation for both entities. As part of its growth strategy, the Companys expansion not only includes a diversified portfolio of services, but also involves the enhancement of technology infrastructure.

The Company has implemented several initiatives to boost productivity in key areas such as reagents and chemicals, rentals, repair and maintenance, logistics, and home collections. These measures include exploring alternative testing platforms, implementing a differentiated equipment strategy, and enhancing the productivity of field executives. To optimize rental expenses, the Company has successfully renegotiated lease agreements, relocated certain spaces, and surrendered partial spaces, all aimed at improving overall productivity. Additionally, efforts have been made to optimize electricity consumption and annual maintenance contracts for equipment, effectively managing costs in these areas.

The Company is actively focused on improving its technological capabilities. It has initiated the upgradation of a lab information system along with advanced tools such as artificial intelligence and data mining. These technological enhancements have significantly contributed to enhancing operational efficiencies. The Company has successfully reduced its debtor outstanding and inventory to a remarkable 28 days. Moreover, the implementation of these advanced technologies has led to quicker turnaround times, further streamlining and improving the Companys overall performance.

Return to growth

During the fiscal year under review, the Company operated a vast network of clinical laboratories, including the prestigious National Reference Lab in Delhi and Regional Reference Labs in Kolkata, Bangalore and Mumba

i. Additionally, the Company established a nationwide presence through Patient Service Centres (PSCs) and Pickup Points (PUPs). The Companys comprehensive range of diagnostic services, including pathology, radiology and cardiology tests, enabled it to sustain its market leadership in the business-to-consumer (B2C) segment, even with reduced revenue from COVID-related testing. Dr. Lal PathLabs also achieved remarkable growth in their non-COVID operations, with increased revenue, sample collection and patient numbers. This positive trend reflects their success in providing quality diagnostic services to a diverse customer base. One of the key growth drivers for the Company was its strategic expansion efforts, particularly in the Western region. Dr. Lal PathLabs continues to make progress in the southern region. The company experienced a growth rate in the South that was on par with its overall growth rate, indicating steady expansion. Dr. Lal PathLabs remains focused on further expanding its presence and market penetration in the South and other geographical areas where it currently operates.

Opportunities and threats

For the Indian healthcare industry, the pandemic was a shocking revelation. There was an immense lack of adequate testing, accessibility and report delivery in the wake of an unprecedented medical crisis. The diagnostics industry endured an emergency, but it was able to emerge from it due to breakthroughs in technology and innovation.

Today, people are increasingly interested in preventive healthcare and a majority of medical practitioners around the world rely on tests before prescribing treatment. Furthermore, the proliferation of healthcare services and insurance has elevated the diagnostic industry to a critical sector.

The Indian diagnostics market is its highly fragmented, with large chains, hospital laboratories, and standalone centres. This poses a major threat to the sector. The lack of entry barriers and absence of strict regulations in the business have also resulted in higher number of unaccredited labs and unorganised players, which form a key component of this fragmented market.

This affects the quality and credibility of the industry, which is dominated by a few large chains besides various small and regional players. Therefore, the industry runs on a high-volume, low-cost testing model adopted by most companies. The lack of regulations also leads to a gap in pricing, especially between urban and rural cities, and therefore demands an urgent look into stricter laws. The COVID has also raised the challenge for several small players who struggle to offer fast and accurate tests simultaneously.

However, players who adapt intelligent solutions will aid in bridging the gap between hospitals and patients, improving access to care, especially in smaller Indian cities. These improvements coupled with stringent regulations, and a people-friendly approach and policies, will help the sector achieve immense growth in the years ahead.

Geographywise Breakup


FY 2021 FY 2022 FY 2023
DNCR 578 714 636
Rest of North India 465 597 610
East India 264 306 287
West 153 287 309
South 88 139 127
CTL & Intl. 34 44 47


1,581 2,087 2,017



FY 21 781 2.46
FY 22 765 2.42
FY 23 750 2.69


The Companys consolidated revenues totalled 2,017 crore for the financial year ending March 31, 2023. Non-Covid revenue stood at 1954 crore, representing a growth of 15.5%.


Cost Management is a key focus area for Dr. Lal Pathlabs. The Companys Operating expenditure for the financial year ending March 31, 2023 is in line with last year. The major cost line items for the company are cost of reagents and chemicals, personnel costs, fees to collection centres, cost associated with logistics, information technology and infrastructure among others.


Normalised EBITDA margins (excluding notional depreciation, RSU, CSR and exceptional expenses) totalled 528 crore during FY23, recording a margin of 26.2% .


PBT for FY23 was 344 crore and Normalised PBT (excluding notional depreciation and exceptional expenses) stood at 400 crore at a margin of 19.8%.

PAT margin reported at 12.0% year-on-year at 241 crore. Normalised PAT (excluding notional depreciation and exceptional expenses) stood at 297 crore at a margin of 14.7%.

Cash and Bank

Cash and Cash Equivalents as of March 31, 2023, is 838 crore, cash balance after netting of borrowings is 601 crore.

Key financial ratios

According to the SEBI (Listing Obligation and Disclosure Requirements) Regulation of 2015, the Company is obligated to provide information about significant changes in key financial ratios. These changes are considered significant if they show a difference of 25% or more compared to the previous financial year. The Company has identified the following ratios as key financial indicators:


FY 2023 FY 2022 (%) Variance Reason for variance
Debtors Turnover- 25.8 27.4 -5.9% -
Inventory Turnover 10.4 10.6 -1.9% -

Interest Coverage Ratio

11.5 17.4 -33.9% Interest Cost in FY22 is for part of the year while it is for full year in FY23.
Current Ratio 2.1 1.8 18.3% -

Debt Equity Ratio

0.2 0.3 -28.8% Improved due to reduction in borrowings
Operating Profit Margin (%) 19.3% 22.6% -14.7%  

Net Profit Margin (%)

12% 17% -28.8% Decline due to significantly high base of Covid in FY22 and increase in notional depreciation on consolidation of Suburban
Normalised Net Profit Margin 15% 18% -16.7%  

Revenue growth declines due to lower contribution from Covid (3%) as compared to last year (19%) whereas non-COVID revenue registered a growth of 16%. While the revenue per patient has reduced compared to last year, as a result of lower contribution from Covid test portfolio. The inventory turnover ratio has improved due to efficient inventory management during the year ending March 2023.

Operational highlights

During the course of FY 2023, Dr. Lal PathLabs successfully operated a network of 277 clinical labs, which includes the prestigious National Reference Lab in Delhi and the Regional Reference Lab in Kolkata, Bangalore and Mumba

i. Additionally, with 5,102 Patient Service Centres (PSCs) and 10,938 Pick-up Points (PUPs), the Company has established a nationwide presence. This extensive infrastructure enabled the Company to offer a comprehensive range of diagnostic services, consisting of 481 test panels, 2,763 pathology tests, along with 1,947 radiology and cardiology tests. The Companys revenue mix remained skewed towards business-to-consumer (B2C) channels, which accounted for 72% of the total revenue. Dr. Lal PathLabs served 26.9 million patients in the year under review, with a total of 72.3 million samples collected and processed. Despite a considerable reduction in revenue from COVID-related testing, which predominantly belonged to the B2C segment, Dr. Lal PathLabs has maintained its market leadership in the B2C space. Moreover, the Company achieved remarkable growth in the Western region, primarily driven by strategic initiatives aimed at expanding its presence. This region contributed 16% of the Companys overall revenue, demonstrating the effectiveness of targeted expansion efforts. The Companys consistent expansion of clinical labs, the wide network of PSCs and PUPs and the diverse range of tests offered have positioned it as a trusted provider of high-quality and precise diagnostic services across India. 14

Human resource management

Dr. Lal PathLabs has a workforce of 4048 employees (onroll) as of March 31, 2023. The Company considers its people to be the true contributors to its success. It, therefore, aims to implement policies that foster employee well-being and professional growth. The Company continuously strives to nurture a positive work culture and believes in maintaining a diverse yet cordial workforce. The Companys hiring and retention policies are also aimed at creating a team of experts that can further aid the Company to sustain its market leadership.

Internal control systems and their adequacy

The Company has implemented a robust internal controls system that encompasses policies and procedures across all financial and operating functions. These policies and procedures are well-documented. This system ensures the maintenance of accurate accounting records and provides reasonable assurance in terms of the reliability of financial reporting, effective monitoring of operations, safeguarding of assets against unauthorised use or losses, and compliance with applicable regulations.

Cautionary statement

The statement provided in this Management Discussion and Analysis acknowledges that the Companys objectives, projections, estimates, expectations, or predictions may be considered as forward-looking statements under applicable securities laws and regulations. It cautions that actual results may differ significantly from those expressed or implied. Various important factors, such as global and Indian demand and supply conditions, prices of finished goods, availability and prices of input materials, cyclical demand and pricing in the Companys main markets, changes in government regulations and tax regimes, economic developments in India and other relevant countries, as well as factors like litigation and labour negotiations, can impact the Companys operations. The Company does not assume any responsibility to publicly amend, modify, or revise the forward-looking statements based on subsequent developments, information, events, or any other circumstances.