Krsnaa Diagnostics Ltd IPO

Competitive Strengths of Krsnaa Diagnostics:

Some of the competitive strengths are as follows

• Unique and scaled diagnostics company:

Krsnaa Diagnostics is one of the largest differentiated diagnostic service providers in India. The company offers imaging (including radiology), pathology/clinical laboratory services across India. It also operates one of the largest teleradiology hubs in India. In the radiology segment, the company provides X-rays, CT scans, MRI scans, ultrasounds, bone mineral densitometry, mammography amongst others. In their pathology segment, they provide a spectrum of services ranging from routine tests such as CBC or blood glucose to highly specialized investigations for infectious diseases, cancer markers, hormonal assays, and therapeutic drug as-says. . In Fiscal 2019, 2020 and 2021, the company served 3.25 million, 5.27 million, and 5.18 million patients. The Company focuses on and has the largest presence in the public private partnership (“PPP”) diagnostics segment (Source: CRISIL Report). It has been awarded 38 contracts on PPP basis as of June 30, 2021 & has 26 active collaborations in the private healthcare segment. The company’s large network of diagnostic centres, together with the quality of their services at competitive rates, have been key factors in the significant growth that they have experienced over the years.

• Extensive footprint across India with robust infrastructure:

Krsnaa Diagnostics’ network of diagnostic centres spans 13 states across India and as of June 30, 2021 were present in over 1,800 locations. The company has a significant presence in each state where they operate and as part of the diagnostic centres they establish, the company has deployed and operates diagnostic centres across multiple locations within a particular state. The growth of the company’s diagnostic centres across India is primarily due to their ability to understand and analyze new markets and to their project management and execution capabilities. Krsnaa Diagnostics deploys latest equipment and technologies to ensure that their processes are efficient and scalable with minimal errors. The company’s technology platform tracks their operations and internal performance metrics, thereby enabling them to improve the operating efficiency of their business. 

• Business model with robust revenue visibility:

The company’s operations across radiology and pathology provide them with diversified sources of revenue. The PPP segment of healthcare services is a large target market, representing a market opportunity of ₹95 billion – ₹100 billion in Fiscal 2021. Going forward, this market is expected to grow at a CAGR of between 14% and 17% between Fiscal 2021 and 2023 to reach ₹125 billion and ₹135 billion on the back of higher government spending in the PPP segment; Krsnaa Diagnostics has the largest presence in the diagnostic PPP segment (Source: CRISIL Report). Krsnaa Diagnostics’ Public Private Partnership (PPP) agreements to de-ploy diagnostic centres for their radiology and pathology services are typically long-term contracts that en-sure visibility of revenues for their operations. 

The term of the contracts with public health agencies ranges between two years and 10 years and typically include a term extension clause based on performance and mutual agreement. Further, considering the company’s services at competitive rates, public health agencies, in multiple instances, have expanded the coverage of the scope of their services to additional centres without any additional bidding process. 

The company follows a hospital partnership model of operations which ensures captive customer, synergies in various costs as well as significant volumes that ensure the cost structure is efficient. The cost-efficient operations also help Krsnaa Diagnostics to bid at competitive prices thereby allowing them to convert more bids into projects. The Company has been awarded 77.59% of all tenders (by number) that they have bid for since inception.

Risk Factors of Krsnaa Diagnostics:

Some of the risk factors are as follows

• Revenue from sale of service to public health agencies was INR 2,675.70 million in FY21 and represented 67.49% of the total revenue from operations. If the company is unable to negotiate and retain similar fee arrangements, if the contracts are cancelled, or if they are unable to realize payments due to them, their business may be materially and adversely affected. 
• Most of the diagnostic centres have been established and are operated under public private partnership contracts awarded by government agencies through a competitive bidding process. There can be no assurance that the company will qualify for, or that they will successfully compete and win such tenders in the future. 
• Any disruption in information technology systems or the telecommunication network would have an impact on their diagnostic services and can adversely impact their reputation and business.