In conversation with Yash Mutha, Executive Director, Krsnaa Diagnostics Ltd

With our centres ramping up, we see the earnings remaining stable and improving from Q4 onwards, states Yash Mutha, Executive Director, Krsnaa Diagnostics Ltd.

What is your outlook on the Indian diagnostics sector over the medium to long term? Are there any demand trends that are you witnessing post-pandemic?  

According to a report by Praxis Global Alliance, in FY15, the Diagnostic Market size was Rs 377 billion, and organized players had a 15 per cent market share. The market size grew to Rs 730 billion with a 17 per cent market share of organized diagnostic chains in FY21. Moreover, the projected growth is expected at a compounded annual growth rate (CAGR) of 14 per cent to reach USD 20 billion by FY26. Increased healthcare spending, growing income levels, and increased knowledge of preventative testing are the primary drivers. 

Although the Indian diagnostic market is small in contrast to that of developed countries, it is one of the fastest-growing segments of the healthcare industry. However, the industry is facing heightened competition. India has been traditionally an out-of-pocket healthcare market with low penetration of insurance. As a result, pricing is a key factor in such markets. Krsnaa follows a unique business model wherein it participates in PPP tenders. In these tenders’ authorities expect a discount on CGHS rates, (CGHS rates are normally 30 per cent to 40 per cent lower than the market rates) and we offer discounts to these rates. At Krsnaa leveraging our decade-long experience, we know how to provide diagnostic services at these rates leveraging NABL/NABH accredited labs and centres and we have seen existing players usually are not able to match these rates. 

Further new entrants are trying to enter the markets by lowering the prices, the impact of such heightened competition is being felt by existing established players and could impact their businesses. However, the increased competitive pricing does not impact us as our prices are already lower even than those offered by new entrants and hence do not impact our market share.

New business models based on teleradiology and telepathology are emerging to increase diagnostic access, quality, and efficiency. Increased use of technology and digital solutions, as well as a network of collaborations and supply chain improvements, are expected to boost development.

In Q2FY23, Krsnaa Diagnostics reported healthy YoY growth in revenue from operations and profit after tax of 13.5 per cent and 22 per cent, respectively. What are the key factors for your outperformance?

We have continued our growth momentum which is largely driven by our newly established centres moving towards becoming mature centres as well as more awareness being created about our premium services at disruptive rates. Further, as our newly established centres in Punjab and Himachal Pradesh are ramping up, they too helped in contributing to the growth.

What is your current geography-wise mix and how do you expect it to evolve over the 2-3 years?

We currently have 2,000 plus centres of radiology and pathology in 16 states of India and 2 UTs. We recently have also won tenders from the Governments of Maharashtra, Himachal Pradesh and Rajasthan for operationalizing our services. We have forayed into the retail market and will be launching 600 new centres across 5 states of Maharashtra, Himachal Pradesh, Punjab, West Bengal, and Rajasthan.

What are your top 3 strategic priorities at the moment?

Currently, at Krsnaa our top priority is to get the Punjab PPP project firing and ramping up the operations. Along with Punjab, we have won the tender for providing pathology services for the entire state of Himachal Pradesh. Our focus is on getting the Himachal Pradesh project completed as well. Both Punjab and Himachal Pradesh footprints will allow us to provide premium diagnostic services at remote locations to the masses at highly attractive prices. 

Along with the existing PPP projects we are also focussing on increasing our private B2C network through the Krsnaa Business Associate model wherein we have set targets of having 600 collection centres across 4-5 states. 

What is your earnings outlook for the next few quarters?

In terms of earnings, considering the seasonality of Q3 wherein business is normally lower than in other quarters. But, with our centres ramping up, we see our earnings remaining stable and improving from Q4 onwards.