Metropolis Healthcare Limited says Core reached near-double-digit margins

Metropolis Healthcare Limited said Core Diagnostics moved from breakeven at acquisition 1.5 years ago to near-double-digit earnings before interest, tax, depreciation and amortisation (EBITDA) margins by Q2 FY27, while management estimated an internal rate of return (IRR) of about 13% over the past year including faster genomics growth.

How did Metropolis Healthcare Limited improve Core Diagnostics margins?

Metropolis said Core moved from breakeven at acquisition to near-double-digit EBITDA margins after 1.5 years of integration. Management said it has completed a planned restructuring of the Core team and that the next operating priority is to accelerate revenue, rather than disclosed further cost actions or a precise standalone margin percentage.

Core brought Metropolis high-end specialised testing capabilities in oncology and access to additional clinician and patient segments. Management said only a handful of companies in India have the expertise required for such oncology testing, and its integration model is to distribute Core's test portfolio through the broader Metropolis network rather than depend only on the acquired business's original customer base.

Metropolis said cross-selling Core's specialised tests and upselling advanced tests to existing customers are driving Specialty traction. Specialty revenue grew about 20% in Q2 FY27 and H1 FY27 and accounted for 40% of Q2 FY27 revenue, while Metropolis added 43 specialty and super-specialty tests during H1 FY27. The company also said Core's oncology and genomics portfolio has accelerated growth in its own genomics business.

What is increasing demand for Core Diagnostics tests?

Metropolis said Core's specialised portfolio is gaining distribution through its consumer-facing business and business-to-business (B2B) partnerships. In Q2 FY27, B2C revenue rose 17% year on year and B2B revenue rose 15%, while the B2B partner network exceeded 9,000 partners, providing access to hospitals, clinicians and institutions for advanced test referrals.

In B2B, Metropolis reported 7% patient-volume growth and 11% test-volume growth in Q2 FY27. Management said the difference indicated that partners were sending more tests per patient, which is consistent with the push to widen use of specialty tests. It did not disclose Core's standalone revenue, contribution to Specialty revenue or the number of tests routed through acquired operations.

Group revenue was Rs 497 crore in Q2 FY27, up 16% year on year, supported by 10% patient-volume growth and 11% test-volume growth. Management said the balance of growth came from a richer test mix and improved realisation, without a price increase during the quarter. Core's oncology and genomics offering is part of the higher-value test mix that Metropolis is seeking to expand.

Metropolis also cited the National Medical Council Commission advisory on remote digital authentication of laboratory reports as an operating enabler. Management said its laboratory systems maintain audit trails, authentication logs, timestamps and signing credentials, allowing a complex oncology or haematology case from a smaller town to be reviewed by a specialist at a reference laboratory.

How does Core fit Metropolis Healthcare Limited's acquisition model?

Metropolis said Core illustrates its approach of buying businesses at reasonable valuations and creating value over three years through its brand, test menu, specialty portfolio, logistics and procurement. Management estimated that acquisitions executed on this basis can generate IRR closer to 20%, though it did not state a target IRR specifically for Core.

Management contrasted that approach with deals acquired at 18 to 20 times EBITDA, which it said can produce an IRR below 10%. It said diagnostic-business margins may first decline during integration as the acquirer upgrades quality, systems, people and processes, before recovering. Management added that, in its experience, margins almost never rise above their starting level after this process.

Core, DAPIC in Dehradun and Scientific in Agra together increased North India's contribution to about 17% of Metropolis's domestic revenue. Management said DAPIC and Scientific are growing in line with the company average while delivering margins above the overall company margin, but it did not disclose standalone revenue, margins or acquisition costs for either business.

North India was Metropolis's fastest organically growing region in Q2 FY27, according to management. The company said local acquired brands can provide an entry point into micro-markets, from which it can add tests, organise sample logistics and build digital links with doctors and patients. It will continue evaluating pathology and ancillary-services acquisitions in North India, with management saying it will prioritise higher-IRR deals over buying revenue at high valuations.

What does Core Diagnostics add to Metropolis Healthcare Limited's margin trajectory?

Metropolis reported a Q2 FY27 EBITDA margin of 27.2%, up 180 basis points year on year, and an H1 FY27 EBITDA margin of 26.2%, up 190 basis points. A basis point is one-hundredth of a percentage point. Management attributed the group improvement to volume-led operating leverage, cost discipline, productivity measures and a richer business mix including Specialty, genomics and TruHealth.

Core's progress from breakeven to near-double-digit EBITDA margins contributes to that mix strategy, but Metropolis did not quantify its effect on the 180-basis-point Q2 FY27 expansion. Management said the estimated 13% IRR includes the acceleration of its genomics business and expects the return to increase in H2 FY27 as Core revenue rises and its margins expand.

Metropolis expects to complete its laboratory-platform transition in Q3 FY27. Management said the programme standardises test menus, equipment, reagents and turnaround times across the network and consolidates vendors, which is intended to aid gross margins. It is also targeting a centre-to-laboratory ratio of 30:1 and subsequently 35:1 over the next two years, from 24:1 at the time of the call.

The company added 116 collection centres in Q2 FY27 and had added 700 net centres in the preceding 24 months. Tier 3 and rural centres grew revenue by about 20% and represented 26% of domestic revenue. Management said remote specialist reporting can support faster expansion in smaller towns, although it did not disclose the proportion of Core testing that currently originates in these markets.

Conclusion

Core's shift from breakeven to near-double-digit EBITDA margins shows that Metropolis is assessing acquisition value through specialty-test distribution, integration and margin improvement, not acquired revenue alone. The estimated 13% Core IRR over the past year coincided with about 20% Specialty growth and a 27.2% group EBITDA margin in Q2 FY27, though the company has not disclosed Core's standalone revenue or exact profitability.

The next disclosed milestones are Core's H2 FY27 revenue and margin progression after the team restructuring, and completion of the laboratory-platform transition in Q3 FY27. Management is also evaluating a calibrated price revision in Q4 FY27 for part of the business and plans to keep assessing North India acquisitions against its stated return thresholds.