The sellout story in the Indian healthcare industry continues. Piramal Healthcare, the flagship company owned by Ajay Piramal, is believed to be looking at selling its loss-making Rs 200-crore diagnostics business.

Only in May, Piramal Healthcare sold its domestic formalations business to NYSE-listed pharma major Abbott Labs for an up-front payment of $2.12 billion, plus $400 million annually for the next four years.

According to investment banking sources, the companies in the race for Piramal's diagnostic business are Malvinder Singh-owned Super Religare Laboratories Limited (formerly SRL Ranbaxy Ltd.) and Metropolis Labs.

Piramal's diagnostics business revenue stands close to Rs 200 crore. On Friday, Piramal Healthcare stock went up 2% or Rs 10.05 to touch at Rs 509.85 at 12.20 pm on BSE. It had touched a monthly high of Rs 516.6 in early trade.

Piramal Diagnostic Services Pvt Ltd (formerly Wellspring), the wholly owned subsidary, registered a revenue of Rs 194 crore from medical testing charges for the year ended March 31, 2010 against Rs 159 crore for previuos year. But it made a loss of Rs 5.32 crore against the previous loss of Rs 3.71 crore. In May, CNBC had reported Piramal’s plans to close down diagnostic business due to losses the company has incurred in the last couple of years. It is learnt that the company is valued between Rs 600-700 crore.

In October 2006, Wellspring had acquired the remaining 40% stake in its joint venture with Dr Phadke's Path Labs in Mumbai. The entity, thereafter renamed as Wellspring-Dr Avinash Phadke Pathlab and Diagnostics. Dr Avinash Phadke, fromer promoter of Phadke's labs, is currently the director& chief of pathology services, Piramal Diagnostics.

Piramal Diagnostics is one among India’s leading chain of clinical diagnostic centres, with 124 centres in 85 cities, and over 400 collection centres. According to company statement, Piramal Diagnostics performs over 4 million pathology and radiology tests every year.

Mails sent to Piramal Health spokesperson did not elicit any response. When contacted, G.S.K. Velu, managing director, Metropolis Health Services said, "We have just finished our fresh round of capital raising with Warburg Pincus infusing $85 million into Metropolis. We are evaluating several organic and inorganic opportunities for growth. We do not comment on speculations on mergers and acquisitions as a matter of board policy." A Super Religare spokesperson declined to comment.

Ranjit Kapadia, Vice President-Institutional Research, HDFC Securities, sees the move to sell off the dignostic arm as a positive one. "Selling off the loss-making business and retaining the profitable ones is the best way a company can survive. However, the valuation could be a concern for the company which is continuously loss making." Piramal Diagnostic grows at 20% and the overall diagnostic market grows at 15-20%, he added.

Super Religare Laboratories Limited is another leading pathology laboratory network in India, servicing nearly 4,000 hospitals/path labs and over 50,000 doctors. SRL performs over 34000 tests/day and caters to approximately 8 million patients in a year offering a comprehensive range of over 3,500 tests, said a company statement.

Post the Abbott deal, Piramal now retains businesses such as custom manufacturing for third parties, critical care, over the counter consumer products, manufacture and supply of active pharmaceutical ingredients (API), vitamin and fine chemicals.

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