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The Agilus Diagnostics IPO: What You Should Be Looking For In The 2nd Largest Indian Diagnostics?

Photo Of Agilus Diagnostics IPO

By AltG Innovation Centre On Behalf Of Poornima Vardhan And Taponeel Mukherjee

The 2nd largest Diagnostic service provider, Agilus Diagnostics, popularly known as SRL Diagnostics, promoted by Fortis Healthcare, has filed its Draft Red Herring Prospectus (DRHP) with market regulator Securities and Exchange Board of India (Sebi) for an Initial Public Offering (IPO).

The upcoming IPO once again brings the focus to the high-growth, high-margin diagnostic sector.

So What Makes the Diagnostics Industry Attractive?

1. High Growth: The Indian diagnostics space is a growing sector with an annual CAGR of 10-12%.

2. Favourable Tailwinds: The sector benefits from major tailwinds such as rising per capita incomes, rising life expectancy, and the rising prevalence of non-communicable diseases (NCDs), both acute and chronic.

3. High Fragmentation: In aggregate, the four largest players (Lal PathLabs, Metropolis Healthcare, SRL Diagnostics and Thyrocare Technologies) only have about 6% in market share. Local labs have a 46% market share, while Hospital-based labs currently have a 37% market share.

But, What Does Agilus Diagnostics Need To Improve According To AltG’s APEXX Formula?

Lowest EBITDA and PAT Margins Amongst Branded Players: There is a clear need for Agilus to focus on the operational performance of the business. The PAT margin for Agilus is approximately 400 basis points lower than the average PAT of the peers and 600 basis points lower than the EBITDA margin. While the focus needs to be on growth, only growth can deliver margins and thus benchmark return on investment.

How Should Agilus Diagnostics Do So According To AltG’s APEXX Formula?

1. Driving Higher Asset Utilisation:

Aglius needs to focus on driving the utilisation of its existing testing laboratories. Currently, even though the business has the maximum number of testing labs at 413, the number of customer touchpoints per laboratory and the number of customers served per lab are amongst the lowest. Agilus needs to focus on driving utilisation of existing primary service centres, local lab partnerships and hospital partnerships to drive high utilisation at the regional lab facilities servicing these points.

The secret to earning investment returns in the diagnostic industry in India is to generate the necessary return on the CAPEX (Testing Laboratory is referred to as a Fixed Asset) required for setting up the Testing Laboratory after the OPEX has been covered.

2. Use The Strong Brand To Build PAN India Presence: For Agilus to unlock the next phase of growth, there are 2 two important drivers: Increase its B2B offerings and expand via asset-light partnerships in Tier 2 and 3 cities.

This is in line with the US diagnostics market. It increased about nine times, from USD 15 billion to USD 147 billion, between 2000 and 2020. The two largest diagnostics companies in the US, Labcorp ($14.86 billion in revenue) and Quest Diagnostics ($9.48 billion in revenue) - are principally focused on the B2B business.

The Value Of Agilus and The Future Of Diagnostics According To The APEXX Formula

With the industry median for P/E at 54.4 (top 4 players), given the lowest margin profile of the business, the valuation of Agilus will be in the range of $600 million to $900 million.

The diagnostics in India is poised to be a $20 Billion Industry that will generate exceptional financial returns for investors in the next 10 years.

The Future Is Roll-Up Of Diagnostic Businesses

Like Aglius, there are multiple opportunities in the private companies in the Diagnostics and Healthcare space in India. The APEXX Formula sees value creation by creating platforms via acquisitions and integration to create scale in a highly fragmented industry. The diagnostic industry in India will see significant demand for platforms that can acquire and effectively integrate smaller diagnostic businesses. Agilus’ listing would mean 4 significant listed diagnostic players and acquisitive PE funds in the market. The APEXX Formula has a clear take away from the Agilus IPO, allocating capital to Diagnostic Roll-Up Platforms.


  1. Conversion Rate Assumed: 1 USD = INR 83

  2. All returns are in INR terms

Disclaimer: Any views, comments or communication made via emails (above or in the past) should not be construed to be investment advice by Alternative Growth (hereafter referred to as “AltG”) in any form whatsoever. AltG does not make an offer to sell or solicit to buy any securities.


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