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ICICI Venture-funded Metropolis Labs, which is in the diagnostics space, will continue its growth strategy through acquisitions. The Mumbai-based company is planning to acquire diagnostic chains in regional markets that have a minimum turnover of $1 million, a senior official told VCCircle.

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“We will acquire labs which are number one or two in that region,” said GSK Velu, Managing Director, Metropolis Health Services, outlining the acquisition strategy. The company has a war chest of up to Rs 40 crore to conclude these acquisitions.

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To spearhead the next level of growth, Metropolis is keenly evaluating the IPO route in 2010, Velu said. An IPO could probably lead to an exit for ICICI Ventures, which invested $8 million or Rs 35 crore for a 20% stake in the company in 2006. The company is also looking at the other option of raising another round of private equity funding. “We have not yet decided on the route,” Velu added.

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Metropolis has grown from a purely Mumbai-based lab to a network of 50 labs across India and a few Asian countries. Much of this growth has been on the back of these mini-acquisitions that have enabled consolidation in a fairly fragmented industry.

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Two months back, it acquired two path labs in north India. In the last five years, Metropolis has made 12 acquisitions. It recently acquired a majority stake in Bangalore-based RV Diagnostic Laboratory and achieved competencies in providing highly specialised tests.

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Metropolis wants to expand by identifying such labs, acquiring them and using it as its hub. A lot more consolidation is expected in this area as there are only a few big players in the path labs space.

 

GSK Velu lamented the lack of regulation for private players that has a direct impact on the quality of service. He said, out of close to 1 lakh labs in the country, only less than 100 were accredited. To increase affordability, pathology needs to follow the example of the pharma industry and develop indigenous capability, he added.

 

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