About Suraksha Diagnostic Limited

Suraksha Diagnostics is a premier healthcare provider, offering a comprehensive, one-stop solution for pathology and radiology testing, along with medical consultation services, through an extensive operational network. Established in 1992, the Suraksha brand has become synonymous with quality diagnostic services in Kolkata, delivering a full suite of pathology and radiology services under one roof.

Leveraging a strong legacy in their core markets of Kolkata and the surrounding regions of eastern and north-eastern India, Suraksha Diagnostics has built a reputation for excellence and reliability. Their dominant market position, bolstered by a robust operational history, expansive network, and commitment to superior quality, enables them to cater to the growing demand for organized diagnostic services in these fast-expanding markets.

Equipped with advanced technology and supported by highly skilled laboratory professionals, Suraksha Centres ensure accurate and timely results across a wide spectrum of diagnostic services. With a mission to expand their footprint and provide hygienic, reliable, and affordable healthcare services, Suraksha Diagnostics remains a trusted partner in the journey toward better health.

As ofJune 30, 2024, The Company have 1,506 permanent employees and contractual employees/consultants on retainer basis, including 23 laboratory doctors, 255 radiologists/other reporting doctors and 529 technical staff. The Banker of the Company are HDFC Bank Limited and Kotak Mahindra Bank Limited.

Introduction to healthcare industry in India
India’s fast-growing healthcare industry has become one of the leading contributors to the economy. A combination of economic and demographic factors is driving healthcare demand in the country. Factors such as an ageing population, a growing middle class, increasing incidence of lifestyle diseases, and the adoption of technology are some of the key drivers.

The domestic healthcare industry comprises the following segments: hospitals, pharmaceuticals, medical devices, diagnostic services, medical equipment, and other support services to the healthcare players.

The healthcare industry grew at 10-11% CAGR between FY17 and FY24 to ~Rs 9.5-10.5 trillion. By FY28, the industry is expected to grow to Rs 14.5-15.5 trillion, at a CAGR of 10-11%, driven by factors such as an aging population, increased incidence of lifestyle diseases, growing healthcare awareness, technology adoption and a growing affluent middle class.

Within the healthcare industry, Diagnostics formed about 10% of the industry in FY17. The diagnostic industry grew at 9-10% from FY17 to FY24 to form 9% of the 9.5-10.5 trillion Healthcare market in FY24. The growth was led by increasing number of people undergoing preventive health check-ups, Rising disposable income, prevalence of non-communicable diseases etc. From FY24 to FY28, the diagnostics industry is expected to grow at 10-12% thereby outpacing the growth of the healthcare industry which is expected to grow at 10-11% CAGR during the same period.

Overview of the Indian diagnostic industry 
The diagnostic services sector plays a pivotal role in recommending essential treatments and monitoring the recovery of patients post-treatment. The industry experienced robust growth at a CAGR of 9-10% over FY17 and FY24 due to factors like increasing urbanisation, rising disposable income, increased test menu by players, increase in prevalence of non-communicable diseases which has led to a rise in healthcare demand.

The diagnostics industry’s market size is poised to grow at a CAGR of 10-12% over FY24 and FY28 to Rs 1,275-1,375 billion led by rising literacy rates and disposable income among the population, leading to increased awareness and demand for quality healthcare services, including diagnostics. Further, a rise in urbanisation, coupled with lifestyle-related diseases and aging population, will create a greater need for accurate and timely diagnostic services to identify and manage these health issues effectively. Chained diagnostic players are expected to grow at a faster rate than the overall industry between FY24 and FY28.

Overall, increased focus on preventative medicine, rising incidence of chronic and lifestyle diseases, a growing preference for evidence-based treatment, the changing nature of diseases, expansion of organised healthcare and increased use of technology in healthcare are set to drive Indian diagnostics services industry’s growth.

The pathology segment, estimated to have grown steadily at a CAGR of ~8-9% over FY17 to FY24, is estimated to clock a CAGR of 9-11% over FY24 to FY28. This trajectory suggests an increasing demand for pathology diagnostic services, potentially driven by factors such as rising chronic disease prevalence and improved diagnostic technologies. Similarly, the radiology segment, estimated to have grown at a CAGR of ~9.5-10.5% over FY17 to FY24, is expected to rise further at a CAGR of 11-13% over FY24 to FY28, indicating robust growth potential led by technological advancements and heightened demand for diagnostic imaging across medical specialties. Overall, the analysis underscores positive growth prospects for both pathology and radiology segments in the Indian diagnostic market, driven by evolving healthcare needs and technological innovation.

As per volume data reported in HMIS by the Ministry of Health & Family Welfare, the penetration rates of pathology and radiology services in East including Northeast India (data as of March 2021) underscore significant disparities with other regions. The region exhibits the lowest penetration rates for both pathology (14%) and radiology (18%) services. These figures point towards potential challenges in access to and penetration of diagnostic facilities in the region.

There are various reasons for the disparity, including inadequate healthcare infrastructure, limited availability of diagnostic facilities, geographical barriers and socioeconomic factors. Also, in the region, particularly in rural and remote areas, healthcare facilities are scarcely equipped with pathology and radiology services.

Addressing these challenges requires targeted interventions aimed at improving healthcare infrastructure, increasing access to diagnostic services and addressing socioeconomic determinants of health. Investments in healthcare facilities, equipment and trained personnel are essential to enhance the availability and quality of diagnostic services in East India including Northeast. Initiatives such as mobile healthcare units, telemedicine and community health programmes can also help reach underserved populations in remote areas.

Furthermore, policy interventions focused on promoting preventive healthcare, early diagnosis and awareness about the importance of diagnostic services are crucial. By prioritising healthcare initiatives tailored to the specific needs of the eastern region, policymakers can work towards reducing healthcare disparities, improving health outcomes and ensuring equitable access to diagnostic services across the region.

The Indian diagnostics industry is highly fragmented, given the high proportion of standalone centres and hospitals labs occupying a smaller share of the pie. Diagnostic chains are further split into regional and multi-regional chains, with regional chains accounting for the majority.

The industry’s profitability is defined based on high volume of testing and optimal utilisation of labs. Given the low entry barriers and lack of a strong regulatory environment, the industry has many standalone players. This has made the industry highly competitive and fragmented, and hence, standalone diagnostic players are finding it hard to stay profitable. The standalone players also face problems in scaling up their operations on account of the large capital expenditure required for investment into technologies enabling complex radiology and pathology services.

Diagnostic chains, on the other hand, have stronger financial discipline and negotiating power with suppliers, greater capital, and administrative resources to meet the needs to sustain the business compared with standalone diagnostic centres. Diagnostic chains have expanded into geographies, where they have limited presence via the inorganic route. Tier 2 and 3 cities are the major focus of these established players, where struggling standalone centres become prime opportunities for acquisition.

The industry has witnessed a shift from standalone centres to diagnostic chains, due to their higher quality of service and unavailability of complex tests with standalone centres - not only at the country level but also in regional markets.

The shift was further accelerated by Covid-19 pandemic, which significantly increased the demand for diagnostic testing, highlighting the importance of reliable and accessible diagnostic services. Diagnostic chains, with their extensive networks and advanced infrastructure, were better positioned to handle the surge in testing volumes. The diagnostic chains could quickly scale up their operations, adhere to safety protocols, and provide accurate and timely results. Furthermore, their ability to provide home collection services and online report access during lockdowns made them more accessible and convenient for patients, which led to a significant increase in their market share.

In addition, diagnostic chains possessing better national and international accreditations and a scalable business model, wherein through brand reputation and operational efficiency these chains can cater to a larger set of population, has led to an increase in the share of diagnostic chains to 20-24% of the overall diagnostics industry as of FY24 from 13-17% in FY20. Within the diagnostics chains, multi-regional chains led diversified presence, large scale of operations supporting volume growth coupled with acquisitions have gained market during the period mentioned. 

Healthcare workforce in India
By 2030, number of doctors in the actual stock is projected to increase to ~1.51 million from 1.25 million in 2025. Concurrently, number of doctors in active healthcare workforce is expected to rise to 1.1 million from 0.87 million. Notably, the increase in the actual stock of doctors is anticipated to be more substantial (0.26 million) from 2025 to 2030 compared with the period until 2025, which saw a rise of only 0.17 million. Similarly, the increase in active healthcare workforce is projected to be higher from 2025 to 2030 as against 2020 to 2025. This growth is attributed to the establishment of new medical colleges in the country.

India's healthcare personnel landscape presents a nuanced picture characterized by disparities in distribution and shortages in critical areas. While the country boasts a rich pool of medical professionals, including physicians, nurses, and allied health workers, the density per capita falls below the global average and lags significantly behind that of developed nations. This shortage, particularly pronounced in rural and underserved areas, underscores persistent challenges in ensuring widespread access to quality healthcare services. Efforts to address these gaps are underway, with initiatives aimed at bolstering training programs, enhancing infrastructure, and promoting innovative models of care delivery. However, the journey toward achieving equitable healthcare access for all remains an ongoing endeavor, requiring continued investment and strategic interventions to strengthen the healthcare workforce and improve health outcomes across the nation.

Overview of diagnostic market in West Bengal
The Diagnostic market in West Bengal grew at a CAGR of 9-10% from FY17 to FY24 to reach a market of Rs. 61-63 billion in FY24. From FY24 to FY28, West Bengal diagnostic market is expected to clock 10.5-12.5% CAGR thereby reaching a market size of Rs. 95-100 billion in FY28.

The growth has been mainly driven by growing middle class population with higher disposable income who are willing to spend on quality healthcare, regular health checkups and preventive care, rising incidence of chronic non-communicable diseases (NCDs) such as diabetes, hypertension and cardiovascular diseases, and medical tourism wherein West Bengal particularly Kolkata has become a healthcare hub with patients from neighbouring states and even countries such as Bangladesh visiting the state for treatment, thereby driving up demand for diagnostic services. The state had second highest incidence of NCDs in CY21 as per data report in the National Health Profile 2022. . In terms of medical tourism, Bangladesh accounted for 69% of all medical tourists visiting India in CY22. The West Bengal diagnostics market is fragmented in nature, with low penetration of chained diagnostic centres and high concentration of standalone centres. The fragmented nature of the market highlights an opportunity for chained players to increase their market share in the region.

The hospital-based diagnostic market is characterized by integrated services that provide immediate and comprehensive testing capabilities for inpatients, outpatients, and emergency care. Hospitals offer a broad spectrum of diagnostic services, ranging from routine blood tests to advanced imaging. Standalone and chained diagnostic centres on the other hand comprises of standalone radiology/pathology centres, and chained diagnostic centres that operate independently from the hospitals. These centres are often more accessible with locations spread across urban, semi-urban and rural areas.

For FY24, hospital-based diagnostic centres made up 38-42% of the West Bengal diagnostic market by value, while stand-alone and chained diagnostic centres together made up 58-62% of the West Bengal diagnostic market by value.

SURAKSHA DIAGNOSTIC LIMITED COMPETITIVE STRENGTHS
1. Diagnostic chain with in eastern India well positioned to leverage growth opportunity for organized diagnostic chains in the diagnostic services markets in eastern and north-eastern India
2. Track record of profitability and financial performance
3. Integrated diagnostics provider with one-stop solution offering pathology and radiology testing, and medical consultation services
4. Technologically advanced clinical infrastructure and trained personnel providing diagnostic services
5. Commitment to quality driving high individual consumer business share and customer retention
6. Management team with relevant industry experience

SURAKSHA DIAGNOSTIC LIMITED GROWTH STRATEGIES
1. Strengthen their position in their core geography i.e. Kolkata and the rest of West Bengal
2. Expand beyond their core markets in adjacent geographies of eastern and north-eastern India.
3. Supplement organic growth with selective acquisitions
4. Leverage technology to elevate customer experience
5. Augmenting medical consultation services offered through polyclinic chambers at their diagnostic centres to boost their revenue
6. Enhance their revenue by inking business-to-business (“B2B”) and corporate partnerships

SURAKSHA DIAGNOSTIC LIMITED RISK FACTORS & CONCERNS
1. 95.48% of their Revenue from Operations in Fiscal 2024 was generated from West Bengal.
2. The B2B segment contributed to 6.17% of their Revenue from Operations in Fiscal 2024 and any non-renewal or cancellation of their arrangements with their institutional customers, including hospitals, and Public-Private Partnership (“PPP”) contracts may adversely affect the business, results of operations and financial condition. 
3. They generated 93.83% of their revenue from operations for Fiscal 2024 from the B2C segment and their ability to attract individual patients is largely dependent on their brand recognition, reputation and brand image.
4. They significantly depend on third party vendors and suppliers to provide them their testing equipment, test kits, and reagents.
5. They operate 161 out of their 166 collection centers through franchisees.
6. They operate in east India, the East including Northeast region lags behind with 20-21% share in the diagnostic market.