I did ask them the question on the name change.
Their plan is to implement something similar to what they did in Pune. Even there, they had renamed it after 2 years.
Usually acquisitions of regional chains have contingent consideration clause, and it is dependant on future performance of the acquired chain.
Their reasoning is, since suburban is a stronger name (and it is i believe), they don’t want a dispute later regarding, due to the name change, management rejig, revenues were compromised and the contingent consideration didn’t materialize.
Also lately selling to some part can be attributed to the FII selling in the indian equities and FIIs hold 25% of the float.
I definitely agree, we should look at competition closely. However, the entry maybe easy, but scaling the business is real hard.
Players Vedanta, HCL also tried diagnostics however, they couldn’t scale.
Hence Dr Lal’s strategy has been to make expansion in west through acquisitions recent one being a prime asset suburban.
Now i believe, the dominant regional players have either been sold to Dr Lal, Metro, other organised player and hence making it difficult for any new player to scale by acquisition.
Also market on the unorganized side is very fragmented with enough room for organized players to grow on the back of market share.
Disc : Invested hence views are biased but tracking the business developments very actively to keep generating anti thesis pointers.
Diagnostic is very dependent on the doctor asking report from specific place - as fragmented hospitals getting more organized and more doctors working for big hospital chains rather having independent practice puts up big question mark on real market potential independent diagnostic chain have on grow exponentially like in past?
With this digital market players who will eat market from consumer end ads real question mark for exponential growth.
Hi @nikhil_chowdhary, I went through the con-call and read through your question and the response from management. Thank you for your insightful question that you bought up.
The management point can surely be considered. As you have done the research already do you know how is the performance of Dr. Lal path labs as compared to sub urban in Mumbai?
I am just trying to understand if they change the name after 2 years will the footfall reduce with Dr. Lal branding.
Also in next con-call will it be possible to ask management if they are actually working on the negative google reviews in Bangalore and Mumbai regions as there are a lot of unhappy customers who took time to put negative reviews about staff’s rude behavior, not responding to calls and delay in reports?
In today’s world online reviews matter a lot and a local diagnostic center also care about positive feedback, I see a clear negligence from management on positive online feedback and user experience.
I still see business has an early mover advantage as they know how to scale but with lot of competition from hospitals as well as fintech players with bad user experience it can turn out to be difficult.
A fintech player with a potential to burn a huge VC money and focus on user experience can be a headwind in new regions. As I am pretty sure a good competition will look into the good work of doctor Lal as well as where they are doing wrong.
Disc:- Invested and looking to increase the position.
Yes we can definitely highlight the review point.
Also, the loss making funded Startups overall, not just restricted to diagnostic space here is my broad opinion.
Discounting is the only differentiator for them and it cannot be a sustainable source of Moat. You are at the mercy of next fund raise.
When the liquidity tap stops, many will go belly up.
We have started hearing cash crunch at better.com, Meesho, Grofers, LIDO. In the inflationary times we are seeing, many will have hard time raising money.
Also, i don’t see any reason cash rich companies like Dr Lal cant replicate on the App/Website experience like the new age companies (they can hire the best folks in the industry)
Below is Latest ken’s article, which had highlighted about discounting as the only differentiator to play the tech game.
Would like to know impact of Tata 1mg on listed diagnostics players like Dr. Lal Path labs.
I have seen aggressive marketing push and cost effective options provided by Tata 1mg on lab tests (LINK). You might have seen ad in most of leading news papers and digital/TV media. Will there be margin shrinkage of Dr. Lal Pathlab and other players due to big elephant started dancing in this space. (https://www.1mg.com/labs?utm_source=1mg&utm_medium=jewel&utm_campaign=labsgrowth)
Yes. It will shrink the margin of lal path lab. Also there are several other factors…Like pharma companies opening own Pathology lab chains, etc