Reports indicate that Reliance Life Sciences (RLS) is considering a foray into India’s medical diagnostics testing industry estimated at $10bn.
Current capacities are claimed to be under-utilised in the diagnostic industry. As per Dr. A Velumani (CMD, Thyrocare), around 95 per cent of the laboratories are working under capacity, with machines lying idle. He believes that Reliance’s entry may help in bringing the prices in general and help boost the volumes. This would benefit the industry at large.
It’s important to note here that Thyrocare is the pioneer of low cost bulk diagnostics processing in India and over the years has performed exceeding well.
Industry Macro Outlook
The diagnostics market in India is estimated to clock 11 per cent growth rate over the next five years, with preventive tests being a major growth driver. Currently, preventive testing accounts for less than 10 per cent of the overall market and is growing annually at 20 per cent.
As per Goldman Sachs, if the government increases incentives towards preventative testing, the segment can grow at 27 per cent CAGR during FY19E-23.
Major organised players in the industry include Thyrocare, Dr Lal Pathlabs, Metropolis, Apollo and SRL. Besides, there are numerous other diagnostic facilities – standalone as well as attached to hospitals.
Though industry is putting up a brave face to the prospect of Reliance’s entry into the diagnostic space, personally I would be very cautious on the existing players if that happens. We have seen what Jio has done to telecom. There is no point in trying to be brave – I would rather let the initial onslaught settle down and then take a call.