According to CRISIL, revenues of diagnostic companies are projected to witness a robust 10-11% growth in fiscal year 2025, building upon an estimated 8% growth in the previous fiscal. This growth trajectory is fueled by a combination of factors including an increasing number of patients and enhanced revenue per patient.

The expansion of diagnostic services into tier 2/3/4 cities by established players is expected to drive higher patient volumes, while the growing demand for comprehensive preventive health packages is anticipated to boost revenue per patient.

CRISIL forecasts that the rising share of higher margin health packages, expected to contribute to nearly one-fourth of total revenues, will maintain operating margins at steady levels of 24-25% in fiscal year 2025, despite ongoing brand promotional expenditure.

Poonam Upadhyay, Director at CRISIL Ratings, highlighted, "Existing diagnostic players are exploring growth avenues beyond routine tests, particularly in metros and urban centers where competition from e-pharmacies and hospital chain labs is intense. The expansion into untapped cities and the increase in collection centers will drive volumes and enhance the utilization of existing test labs."

Furthermore, the post-pandemic surge in health awareness has spurred demand for preventive health checkups. Diagnostic companies are responding by bundling various tests into curated wellness packages tailored to different demographics, leading to a premium charge per patient. The share of this segment is expected to increase to approximately 22-23% in fiscal year 2025, up from 18-20% in fiscal year 2024.

The sustained rise in the share of wellness tests, which contributed to revenue growth in the previous fiscal, underscores the sector's resilience amid challenging times, including the decline in COVID-related tests in fiscal year 2023.

However, the diagnostic sector continues to face stiff competition from hospital chains and e-pharmacies, necessitating higher marketing spends to protect market share. CRISIL expects operating margins of diagnostic players to remain range-bound in the near to medium term, with competitive intensity persisting and initial losses from new labs impacting profitability.

Shounak Chakravarty, Director at CRISIL Ratings, noted, "Operating margins of diagnostic players are expected to remain largely stable, akin to fiscal year 2024 levels, as competitive pressures persist and new lab ventures undergo initial losses before breaking even."