Carlyle-backed Metropolis exits South Africa, eyes acquisitions

Metropolis, a privately-held Indian pathology firm with Rs 650 crore revenues, has exited operations from South Africa. While the company continues to have presence in other African markets like Ghana, Kenya, Mauritius and Zambia, the management has decided to move out of South Africa citing lack of growth and regulatory hurdles.

Speaking to dna, Ameera Shah, promoter and managing director, Metropolis Healthcare Ltd, said that the company had entered the South Africa market back in 2007 through a partnership. "We have sold the business there (in South Africa). We had two laboratories and 1,500 employees there. It was a profitable exit," said Shah, without divulging financial details related to the transaction and the name of the entity that acquired its South African business.

Shah said that though SA may be a growth market for some other industries, that was not the case with pathology. "The market in SA is growing only at 2% for pathology. It's very consolidated and not very attractive like some of the other places that we are currently operating in. It's (SA) like working in Europe and hence not of great interest to us. Besides, it's very highly regulated. For instance, they have rules like company cannot have a pathology lab, all the pathologists have to be local board approved and so on," said Shah.

Additionally, the company has also restructured its operations in the Middle East and only has a collection centre there now. "We earlier had a lab chain in the Middle East. While we still get samples from Dubai into India, we are not operating any labs there. We may look at setting up a few labs there (Middle East) in the future but right now the focus is India, Sri Lanka and Africa," said Shah.

On the company's performance in the other African markets, Shah said, "Kenya is an interesting market and we are seeing good traction there and similar is the case in Ghana. Mauritius is small and we have just entered Zambia about 2-3 months ago, so too early to tell," said Shah.

Overall a profitable business with a good return on investment, Metropolis Healthcare currently has presence in six countries viz. India, Sri Lanka Ghana, Kenya, Mauritius and Zambia. The company has witnessed revenue growth of about 20-25% and profit growth has been around 20%. While Shah did not reveal profit figures citing private company, she confirmed that the company's turnover was around Rs 650 crore, and it currently had 130 labs, 1,000 collection centres and around 3,800 employees.

In terms of expansion plans and capital expenditure (capex), the company will be investing around Rs 150 crore over the next two years, primarily towards inorganic growth. "We are actively pursuing acquisitions and in talks with a few players both in the domestic market as well as international. These acquisitions will predominantly be in the Indian market and a few in the existing and new markets overseas. All acquisitions will be funded through internal accruals," said Shah, adding that the company will also be doubling the number collection centres to 2,000 by the end of this fiscal.

In the last decade, Metropolis has had participation from various private equity investment firms in the past including ICICI Venture (invested in 2006 and exited in 2010), Warburg Pincus (exited in 2015) and Carlyle, which came in last year. "We have also had another financial investor G S K Velu who exited in 2015. The company stakeholders currently comprise the promoter family along with Carlyle holding 30%," said Shah.

On the possibilities of exploring the public markets to provide an exit to Carlyle, Shah said, "They (Carlye) entered only in 2015 and are in no rush to exit and would be happy to stay as long. So that's why am saying the IPO is only an option in the future but it's not something that we have decided on yet."