MedPlus Health Services MD and CEO Gangadi Madhukar Reddy has announced the pause of the company's integrated diagnostics network after achieving 220,000 subscribers against a target of 500,000. According to reports from Alpha Desk, Reddy stated that the company will instead open standalone labs in Bengaluru and Chennai rather than proceeding with the integrated network. Each new lab will cost approximately ₹5 crore to ₹6 crore, with MedPlus already operating one lab in Chennai and planning to add another in Bengaluru. The pause follows a shortfall in subscribers for the Hyderabad diagnostics business, with Reddy saying "Regretfully, I am having to pause this also for now."
The diagnostics business, which started as a pilot in Hyderabad in 2022 and was deferred to February 2024, cost ₹110 crore to ₹120 crore and could serve Hyderabad's 10 million people. As reported by Alpha Desk, Reddy had planned for 5 lakh subscribers paying at least ₹1,000 annually, which would generate ₹50 crore in revenue. The company currently has around 2.2 lakh customers and Reddy indicated the business is profitable and gaining market share. Reddy emphasized that the money would be profitable because customers pay for the services they use, with the company maintaining its position in the diagnostics market.
Despite the diagnostics pause, MedPlus remains on track for its 800-store target by the end of this year. According to Alpha Desk, Reddy confirmed that store expansion and earnings are proceeding as planned. However, the company has put on hold its concierge and wellness service plans, citing management bandwidth constraints and market response as factors in the decision. Reddy said the company does not expect to restart its concierge and wellness service in the foreseeable future, stating the issue is management bandwidth rather than capital. Additionally, MedPlus has parked its plan to purchase land for a food park, having found alternative ways to source cold-pressed oil products.
MedPlus shares were trading at ₹655.40 at 10:54 am on the NSE with a market capitalisation of ₹7,869.58 crore. As reported by Alpha Desk, the shares have fallen more than 19% over the last year. Reddy indicated that this quarter's earnings will recover, stating "This quarter, I think we'll be back." He also confirmed that private-label sales are progressing according to plan, though last quarter's earnings before interest, tax, depreciation and amortisation came in well below expectations. The market reacted to that miss, reflecting investor concerns about the company's operational performance.
Regarding potential divestiture of the diagnostics business, Reddy told analysts that "We always look at everything which is on the table out there," according to Alpha Desk. He did not rule out selling the diagnostics unit to listed or private equity-backed diagnostics companies seeking growth through acquisitions. The company's decision to pause the integrated diagnostics network reflects the challenges of scaling a new business segment while maintaining focus on core pharmacy operations, with Reddy emphasizing that the diagnostics business remains a valuable asset despite the current pause.
