Why Thyrocare Is Choosing Growth Over Profit Margin

Thyrocare Technologies Ltd. wants to continue to grow even if it means losing out on a little profit margin.

“If you want more growth, then you have to dilute the Ebitda in this business,” Chief Executive Officer A Velumani told BloombergQuint in an interview. That won't be a big problem for the diagnostic and preventive care service provider with "the highest operating profit" in the healthcare sector, Velumani claimed. "We will be diluting around 2-3 percent of Ebitda to get 7-8 percent of growth next year."

Velimani said the Mumbai-based company has already diluted margin for around 10 percent of Thyocare’s profiles. "The percentage Ebitda may go down but the absolute number will go up."

He is confident that the company will grow at 23-24 percent on a compounded annual growth rate for the next three to four year. That’s higher than the 15 percent growth he expects for the overall industry.

Healthcare services are expected to grow in Asia’s third-largest economy on rising incomes. Diagnostics comprising imaging and pathology will grow at a more than 20 percent annualised rate to a $32-billion market by 2022, according a report by government’s think tank India Brand Equity Foundation citing Apollo Hospitals and Fortis Healthcare presentations.

The stock has fallen 13.5 percent so far this year, compared to a 5.7 percent rise in the S&P BSE Sensex Index. It trades at 29.5 times estimated forward earnings per shares, lower than the 35.8 times two-year historical average.