Vijaya Diagnostic: A King in the Making

“The second quarter saw a healthy improvement in the demand for Non-COVID business across all segments. The Company managed to enhance its network and make considerable progress on its calibrated expansion plan. The Wellness business is showing positive results and the Company continues to increase its revenue share from this segment. During Q2 FY ‘23, the Wellness segment recorded its highest ever contribution to revenues at 12.4%. This being the case, we are quite sure that the integrated diagnostic service providers derived major business from B2C will not be influenced by competition of different formats.”

– Suprita Reddy, Chief Executive Officer in the Q2FY23 Earnings Call

Dr Surendranath Reddy started Vijaya Diagnostic in 1981. Over the last four decades the company expanded to about 100 centres across Telangana and Andhra Pradesh. In Southern India, Vijaya Diagnostic Centre Ltd. (VDCL)  is considered to be the largest integrated diagnostic chain in terms of revenue. It has also made its mark by being one of the fastest – growing diagnostic chains when it comes to revenue.

Client friendly:

Clients are offered one-stop convenient solutions by the company’s integrated business model of pathology and radiology. Vijaya Diagnostic also has an upper hand in corporate wellness programs and tie-ups owing to the extensive network of spokes and hubs that the company has built around Hyderabad.

Impeccable diagnostic quality :

Vijaya’s high-end quality of equipment and the quality of radiologists they employ is what attributes to the quality edge they have over their peers. Radiology reports heavily rely on the radiologists’ interpretations. Channel checks conducted by us suggest that due to Vijaya’s high quality specialist radiologists, doctors often prefer it as a second opinion while dealing with complex cases. Additionally, attracting new radiologists depends on the calibre of the radiologists already employed as well as the volume of cases that the diagnostic chain can produce. A virtuous loop for the company keeps getting created owing to higher quality radiologists joining Vijaya which leads to higher inflow of cases. As the firm grows, Vijaya is able to continue investing in cutting-edge technology, which boosts sales. Vijaya was a pioneer in introducing high-end equipment technology to the nation.

Large scale business strategy:

A ‘hub and spoke’ model is followed by the company. In this model various specimens from multiple locations get transferred to the company’s national reference laboratory, located beside its flagship Hyderabad centre. It is here that the company produces its findings. This method allows the company to expand its geographical presence with less CAPEX.

Overview:

Owing to the factors mentioned above, in recent years, a total of 20% market share in Hyderabad has been captured by Vijaya alongside foraying into other cities  of Andhra Pradesh & Telangana. The company’s continues to possess one of the highest margins within the industry, its focus on B2C (95% of revenue in Q2FY23), and its continued focus on expansion in the regions it dominates, helps us remain optimistic about the company’s future. Macro factors that include the probability of a quicker market shift to organised companies, synergises these strengths. Greater eastward expansion, particularly in Kolkata, could spur medium- to long-term growth.