When asked how the company would use the cash in the books of around Rs 1150 crore, Om Manchanda, MD, Dr Lal PathLabs said, “We have a three-pronged strategy for cash on books- one, we continue to pay regular dividends. Two, we are investing heavily into high-end portfolio business and three would be inorganic growth options.”
Dr Lal PathLabs posted a very strong set of Q1 earnings aided by the massive surge in Covid tests during the second wave. The diagnostic service provider reported a nearly five-fold jump in its consolidated net profit to Rs 133.7 crore for the quarter ended June 30. The company had posted a net profit of Rs 28.4 crore for the corresponding period of the previous fiscal. Its consolidated revenue from operations stood at Rs 606.6 crore for the quarter under consideration versus Rs 266 crore in the year-ago period. Non-Covid sales growth however looked tepid at only 3% quarter on quarter. However, with Covid tests having gone down in number due to less cases, CNBC-TV18 spoke with the management of the company to understand what the growth trajectory for the company would look like, going forward.
Om Manchanda, MD, Dr Lal PathLabs said, “We normally track our business in two parts, one is non-Covid business and other is Covid. Since, Covid is an unpredictable business, we are now completely focused on non-Covid business. The way it looks, clearly recovery has taken place when compared to the pre-Covid level, and we continue to see normal growth trajectory in non-Covid business.”
He said that last year saw a sharp fall in non-Covid business but this year growth rate for it would definitely be higher than normal growth, “We will get historical trends for us, we have been growing between 14-15 percent. I think we will track that kind of growth levels,” said Manchanda, adding that Covid segment will be over and above that.
With surge in Covid sales the company had clocked record margins of 31 percent. Manchanda said, “These margin numbers are definitely not sustainable because if one were to look at our P&L, we have a very high operating leverage. So, in any quarter or any year when high growth on topline happens, you see a rise in EBITDA margins but clearly this is a one-off, even that has happened and that is why you see higher margins. I clearly do not see this sustainable. Our margin trajectory should also come back to normal level as in the past when Covid subsides,” he added.
On growth, he mentioned, “The focus would be a combination of both, inorganic and organic. Clearly, North and East for us is an organic play because we have good brand franchise and in the South and West, we have subsidiary. In organic direction, we have recently launched a big reference lab in Bengaluru, we are looking at Mumbai market as well. So, in South and West, we continue to see options for both organic as well as inorganic.”
When asked how the company would use the cash in the books of around Rs 1150 crore, he said, “We have a three-pronged strategy for cash on books- one, we continue to pay regular dividends. Two, we are investing heavily into high-end portfolio business and three would be inorganic growth options.”
For the entire interview, watch the video.
(Edited by : Dipika Ghosh)