Diagnostics business expected to grow 20-25% YoY in financial year: Report

The report cited a rise in Covid-19 and allied tests due to the pandemic, and specifically during the second wave, for the observation

A rise in Covid-19 and allied tests due to the pandemic, and specifically during the second wave, is expected to raise the diagnostic sector's revenue growth by 20-25 per cent year-on-year in the 2021-22 fiscal, rating agency ICRA said in a report.

According to the report, operating margins of the sector are expected to rise by 300-400 basis points during the period.

"Recent trends, such as focus on digital brand building, improved offerings in bundled medical packages, changing consumer mindset towards organised players is likely to support demand traction for national diagnostic chains going forward," ICRA Assistant Vice President and Sector Head, Mythri Macherla, said.

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For 2022-23 fiscal — with expected sequential improvement in non-Covid revenues and consolidation of regional chains — revenue growth for the sector is estimated at 8-10 per cent YoY, Macherla said.

Most diagnostic chains have invested in moderate levels of organic expansions and focused on consolidation, with regional chains to tap the under-penetrated market.

"With news around the Omicron variant, testing is expected to increase in December 2021 due to travel norms in certain states. That said, increasing the pace of vaccinations could mitigate the spread of the new variant and reduce the level of Covid-19 related tests in the medium term," Macherla said.

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