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Vijaya Diagnostic Centre Ltd (VDCL), established in 2002, is one of the fastest-growing diagnostic chains of Southern India (Andhra Pradesh and Telangana). VDCL has a strong brand recall in the South Indian diagnostic market, offering one stop, high quality affordable diagnostic services to consumers.

VDCL offers pathology (740 routine tests, 870 specialized tests and 220 basic tests) and 320 advanced radiology tests across its 81 centers. The company sources over 93% of its revenue from individual customers which is a high margin business (unlike other major diagnostic companies, where more than 30% of the revenue is derived either from corporate clients or from the PPP model). For the convenience of customers, the company offers value added services, such as home collection of specimens, house calls and various delivery or access modes (i.e., SMS, email and web portal) for test reports.

VDCL operates on a ‘Hub & Spoke’ model, whereby specimens are collected by spokes / diagnostic centres and hub centres across multiple locations, spanning 13 cities, and delivered to reference laboratories for testing. The flagship hub at Hyderabad has a collocated national reference laboratory along with a diagnostic centre. Off the additional 20 hubs, 10 are piloted along the lines of the flagship hubs. There are 60 additional spokes, which plug into these 21 hubs and help increase the catchment areas.

During FY19-21, VDCL added 4 hubs and 15 spokes to its network. Over the same period, the total number of customer visits increased at a CAGR of 5.1% to 2.63 mn in FY21 (from 2.38 mn in FY19), while the total tests grew at a CAGR of 0.7% to 7.09 mn (from 6.99 mn in FY19). This resulted in a revenue / EBITDA / PAT CAGR of 13.5% / 23.9% / 35.5% to INR 377 cr / 166 cr / 85 cr, respectively, during the same period. As a result, EBITDA and PAT margins improved by 710bps (to 44.1%) and 672bps (to 22.5%), respectively. Subsequently, return ratios RoE and RoIC improved to 23.7% (+134bps) and 29.8% (+897bps), respectively.

The Telangana and Andhra Pradesh diagnostics industry (44-46% of South India) is an INR 19,000-19,500 cr market that has been growing at a 3-year CAGR of 14%. This market is expected to grow to INR 27,500-28,500 cr (~13% CAGR) by FY23 driven by

* Rising NCDs in the states

* Increasing share of aged population

* Rising health awareness

* Increasing health insurance penetration

* Conducive government healthcare schemes

This compares favorably with the pan India diagnostics market which is expected to scale to INR 92,000-98,000 cr by FY23 from the current INR 68,400 cr. Within the Indian diagnostics market, the radiology segment is expected to sustain its 3 years growth rate of 14% to increase its revenue share by 250bps to 43.5% by FY23. As a corollary, the pathology segment share is expected to dip to 56.5% over the same period.

VDCL has robust technical capability and state-of-the-art technology with strong IT infrastructure and it has strong vendor relationships.

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