India's diagnostic industry is witnessing a significant shift as companies increasingly focus on expanding their services into Tier 2 and 3 cities. This move is driven by a combination of factors, including heightened health awareness post-COVID-19, infrastructural developments, and the untapped potential of these markets.

According to According to Aditya Kandoi, CEO of Redcliffe Labs, tier-2 and tier-3 towns are witnessing a compounded annual growth rate (CAGR) of 25%, outpacing the 10% growth observed in metropolitan areas. Currently, these smaller towns contribute approximately 40% of the overall industry revenues for diagnostics, a figure expected to reach parity with metros in the next 2-3 years.

The Indian diagnostics industry is valued at $14-15 billion and is growing at an annual rate of 13-14%. Organized players hold about 25% of this market share, with 15% in laboratories and 10% in radiology.

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Agilus Diagnostics
Agilus Diagnostics reports that 70% of its customer touchpoints are in tier-2 and tier-3 cities, contributing to 60% of its overall revenue. The company plans to deepen its presence across the 25 states it operates in, with 60% of future expansions targeted at these smaller towns.

Metropolis Healthcare
Metropolis Healthcare has a presence in over 700 towns, with a significant focus on tier-2 and tier-3 cities. The company aims to expand its reach to more than 1,000 towns within the next 12–18 months. Revenue from tier-3 cities alone has grown by 23% year-on-year, highlighting the importance of these markets in the company's growth strategy.

Redcliffe Labs
Redcliffe Labs has strategically focused on tier-2 and tier-3 towns, deriving nearly 60% of its revenues from these areas. Approximately 80% of its network is situated in smaller towns. In September, the company raised $42 million, allocating around $20 million for growth and expansion in underserved regions and the remainder for acquisitions in radiology.

Several factors contribute to the rising demand for diagnostic services in smaller towns:

• Healthcare Awareness: Increased awareness about health and preventive care is leading more individuals in smaller towns to seek diagnostic services.

• Infrastructure Development: Expansion of healthcare infrastructure, including the establishment of diagnostic labs and collection centers, is making services more accessible.

• Chronic Disease Burden: The projected increase in chronic diseases such as diabetes, cardiovascular conditions, and cancer, expected to affect 226 million people by 2030, is driving the need for diagnostic services.

• Middle-Class Expansion: By 2030, an additional 140 million households in India are expected to be classified as middle-class, leading to increased healthcare spending.

Rajkumar Rajasekaran, Co-founder of AtGenX Labs, highlights the technological enablers making this growth possible:

The Healthcare Federation of India notes that over 50% of aspirational districts identified by NITI Aayog, which often lack essential infrastructure, are now served by diagnostic chains. Public-private partnerships are playing a crucial role in extending diagnostic services to tier-2 and tier-3 cities, ensuring broader healthcare access.

References:

1. Das, Sohini. “Diagnostic Demand Rises in Towns; Organised Players Lead Expansion Plans.” Business Standard, December 18, 2024. https://www.business-standard.com/industry/news/diagnostic-demand-rises-in-towns-organised-players-lead-expansion-plans-124121801015_1.html.

2. Ganguli, Abhiraj. “Diagnostic Firms Eye Smaller Cities.” LinkedIn News, May 28, 2025. https://www.linkedin.com/news/story/diagnostic-firms-eye-smaller-cities-6879737/.

(Input from various sources)

(Rehash/Sakshi Thakar/MSM)