BNP Paribas expects double-digit revenue growth in diagnostics space

India's healthcare industry has been steadily growing, and the diagnostics space is no exception. According to Sriraam Rathi, the India Analyst-Pharma and Healthcare at BNP Paribas, the diagnostics sector is poised for double-digit revenue growth in the coming years. This is largely due to an increase in demand for diagnostic services, driven by an aging population and rising awareness about preventive healthcare.

"From here on, we expect that there will be a marginal increase in the prices by diagnostic companies, the large organisation chains like Dr Lal PathLabs, and Metropolis Healthcare. So, this is an inflexion point for the sector and we should start seeing performance improvements in terms of growth to double-digit revenue growth and that will lead to the valuation rerating back,” Rathi told CNBC-TV18.

As the diagnostics sector continues to grow, it is likely that we will see an increase in merger and acquisition (M&A) activity. Rathi believes that M&A could be used as a tool to fill the geographical gap in the diagnostics space. This would involve companies acquiring smaller players in regions where they do not have a significant presence, to expand their reach and gain access to new markets.

While M&A can be an effective way to grow a business quickly, Rathi also emphasizes the importance of organic growth. He believes that companies that can grow their business organically will ultimately bring more value to their shareholders. Organic growth involves expanding a business through internal resources such as increased sales, product development, and innovation.

For companies in the diagnostics space, organic growth could mean investing in research and development to create new diagnostic tests and technologies or expanding their services to new areas of healthcare. By doing so, they can increase their market share and grow their business in a sustainable way.

In conclusion, the diagnostics space in India is expected to see significant growth in the coming years. M&A activity may play a role in filling the geographical gap in the industry, but organic growth remains an important driver of value. Companies that can successfully balance M&A with organic growth will be well-positioned to succeed in this dynamic and evolving industry.