(Bloomberg) – India’s listed clinical laboratories are looking for new sources of growth to boost investor interest after seeing their massive corona-driven stock gains more than halved in recent months.
Rising healthcare costs and demand for Covid testing led to multiple stock price gains for pathology companies globally during the pandemic. These gains have begun to fade as eruptions subside and countries appear to be reopening, while concerns about higher interest rates have triggered an escape from risky investments, including biotech.
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The decline in Indian laboratory stocks has accelerated since the beginning of the year after disappointing results. The nation’s longest listed pathology company Thyrocare Technologies Ltd. had lower revenue for the December quarter, hurt by reduced need for Covid-related tests, while larger peers Metropolis Healthcare Ltd. and Dr Lal PathLabs Ltd. missed analysts’ profit estimates.
“The outlook for laboratory equities is subdued,” said Kranthi Bathini, a strategist at Mumbai-based WealthMills Securities Pvt. “Companies must now focus on growth from non-Covid flows.”
India has managed to control the recent outbreak while testing capacity has been significantly expanded, Bathini noted. He said companies have sought to expand through mergers and acquisitions and announced deals when their shares were at the highest valuation.
Metropolis and Dr. Lal announced both acquisitions of smaller players last year seeking to move into new areas. API Holdings Ltd., which owns the healthcare brand PharmEasy and has announced plans to go public, last year bought two-thirds of Thyrocare from its founders.