Billionaire Mukesh Ambani owned Reliance Industries (RIL) biotechnology arm Reliance Life Sciences or RLS, is scouting for partners to start pathology labs across India.
As a part of its strategy to set-up a pathology lab network across the country, RLS wants to begin with 25-30 labs.
The company is looking at a 15:85 ratio for revenue sharing, with RLS keeping 15%, on a net sales basis and the franchise would bear the cost of setting up the labs.
The company plans to follow a hub-and-spoke model for its pathology business, with a reference lab serving as a regional hub providing super-specialized tests.
It would also collaborate with doctors, local collection centers, pathology labs, and hospitals to bring in additional business.
RLS sees the pathology segment as a lucrative opportunity with health insurance coverage projected to grow, an increase in India’s ageing population and a prevalence of lifestyle disorders.
According to an Ernst & Young report of 2018 on health insurance, demand for high-quality medical care is rising in India, leading to growing private participation, thanks to a middle class estimated to grow at a CAGR of nearly 7% for the five years through 2021, and rising household prosperity.
RLS would provide human resource support to franchise partners in terms of hiring the right talent, training of franchisee lab staff, IT support, and admin support.
RLS is developing business opportunities in bio-therapeutics (plasma proteins, biosimilars, and novel proteins), pharmaceuticals (later-generation, oncology generics), clinical research services, regenerative medicine (stem cell therapies) and molecular medicine.
The company operates a state-of-the-art facility in the life sciences domain. Its flagship facility is the Dhirubhai Ambani Life Sciences Centre (DALC) in Navi Mumbai, Maharashtra.
What could be the impact of this development in the domestic market?
We understand that it’s yet early days before one could see a big impact of this newsflow in the domestic market.
While Reliance would obviously ensure a decent market share here going ahead it remains to be seen as to how will it scale up its operations ahead and offer a value for money solution in already competitive Diagonistic market which has large players like Metropolis, Thyrocare, and Dr.Path Labs
From FY15 to FY18, the Indian diagnostic industry is estimated to grow at a CAGR of 16.5% to Rs 59600 crore (US$9.1 billion) in FY18. For the next two years, India’s diagnostics industry is expected to grow at a CAGR of 16% to Rs 80200 crore (US$12.3 billion) in FY20.
Within the diagnostics market, the pathology segment is estimated to contribute 58% of the total market, by revenues, in FY18, while the radiology segment is estimated to contribute to the remaining 42%.
Hence its quite obvious that despite the fierce market competition the upside potential for growth is huge
The overall market for wellness and preventive diagnostics was 7-9% in FY18. This segment is expected to grow at a CAGR of 20% over the next three financial years.
Higher literacy levels are expected to increase awareness of preventive and curative healthcare and, in turn, boost the demand for diagnostic services.
In India, there are four major chains of diagnostic players with a pan-India presence. They are Dr.Lal Pathlabs, Thyrocare Technologies, SRL Diagnostics, and Metropolis.
There are a few regional players who have a strong footprint in a particular region such as Quest Diagnostics (North India), Suraksha Diagnostic (East India), Suburban Diagnostics (West India) and Medall Healthcare (South India).
Net we believe that Reliance is always known to disrupt the market by virtue of its aggressive pricing policy which is clearly evident from the present trends in this market as of now.
So it will be interesting to see how Reliance manages to fight competition and carve out its market share in a growing but fiercely competitive market
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