CARE Ratings said that the rating assigned to the bank facilities of Dr. Lal Pathlabs

(DLPL) derives comfort from the company's leading position in the pathology laboratory (path lab) industry in India coupled with a strong brand image, dominant share in the organised diagnostic industry which has been supported by an established market position in business to customer (B2C) segment, thriving franchisee model and a robust network of laboratories, patient service centres and pickup points spread across India.

The rating also factors in the promoters' long track record of operations in the industry of more than seven decades and the company's healthy scale of operations with steady operating margins which is expected to be sustainable on the back of a large customer base complimented by inorganic growth focused on penetration to new geographies.

The rating also takes into account the company's network expansion arising from acquisition of Suburban Diagnostics India Private Limited (SDIPL) and the expected operational efficiencies as well as geographical diversification from the said acquisition.

The rating takes cognizance of the company's healthy financial risk profile marked by healthy debt coverage indicators, strong net worth and Nil net debt as on 31 March 2022, and 30 September 2022, coupled with a strong liquidity profile of the company which is expected to continue on the back of healthy cash accruals and no debt-funded capex in the medium term.

However, the rating is constrained by the company's presence in a fragmented industry with increasing competition from online aggregators providing diagnostics services.

Dr. Lal Pathlabs Limited is a flagship company for the Dr. Lal Pathlabs Group and is engaged in business of providing diagnostic and related healthcare tests. The operations of the company are spread across the nation, majorly focused on Northern part of India. Along with operating within India, the group also operates its path labs in Nepal, Bangladesh, Kenya etc. through its subsidiaries which accounts for less than 1% of the total income of the company.

The diagnostics service provider's consolidated net profit declined 24.53% to Rs 71.7 crore despite of 7.1% rise in revenue from operations to Rs 533.8 crore in Q2 FY23 over Q2 FY22.

The scrip shed 0.93% to currently trade at Rs 2210.70 on the BSE.