“We are doing close to Rs. 200 crore in revenue this year for just this city (Chennai). When one city can generate so much revenue for a single brand, the size of the eye care industry is obviously huge in India.”

According to a 2010 study by Frost & Sullivan, a business research and consulting firm, Vasan is the largest standalone eye care player on a global scale, followed by Spain’s Clinica Baviera. Having started as an eye care specialty hospital, Vasan has also ventured into dental services last January and now has 12 such centres across India. In a society where doctors thrive on family and friends’ referrals, Arun believes Vasan has been able to gain the confidence of its customers by providing skilled service and superior infrastructure with the right marketing.

Vasan has received three rounds of funding from venture capital firms Sequoia Capital (Sequoia) and Westbridge Advisors Pvt. Ltd. (WestBridge) between the years 2008 to 2010 to the tune of US $ 50 million, and had used this funding to pursue its expansion plans. “We invested in Vasan for several reasons – highly dynamic and visionary founding entrepreneur, strong track record of performance and proven ability to scale, one of the best operating teams in Indian healthcare services and a very attractive market segment in eye care and the broader day care market,” says co-founder and managing director of Westbridge, K. P. Balaraj, who was previously managing director at Sequoia. Additionally, he praises Arun’s commitment and ability to spot an opportunity early enough. In a few years time, Balaraj pegs Vasan to be in the same league as Apollo Hospitals and Fortis Hospitals. And with the aggression that the company is displaying in terms of scaling up existing models and identifying newer verticals, Vasan is well on course to join the next league. For the 2011-2012 fiscal, it is targeting a turnover of Rs. 1,000 crore, up from a turnover of Rs. 500 crore in the last fiscal at a growth rate of 100 per cent.

Operational model

Operating out of leased buildings, Vasan invests of up to Rs. 10 crore for each eye care centre and Rs. 3 crore – 4 crore for every dental centre and ensures that the best equipment and a skilled team are in place. Arun is confident that by the year-end, the total number of eye care and dental centres would touch 125 and 25, respectively. Each of these centres is fully owned and operated by Vasan and surprisingly, Arun does not believe in joint ventures or taking the franchisee route. “I do not believe those models work well in the Indian environment, especially in a sector like healthcare, where your partners should bring in the same level of commitment and reliability,” he says. So, how does he make sure everything runs smoothly? “When you have the right team and trust them, it is easier to manage such an enterprise,” he states.

According to Dr. Rana Mehta, executive director and healthcare advisory at PricewaterhouseCoopers Pvt. Ltd., the fundamental business model for most eye care players is the same across Tier-I and Tier-II cities. “Tier-I cities have a larger format where both cataract operations and other surgeries are equally dominant. In Tier-II places, cataract surgeries are the mainstay for the centre,” he says while adding, “About 60 per cent of most eye care establishments’ revenue comes from cataract operations. This is the sector’s main growth driver with a population of 1.2 billion people that will need cataract operations once they cross the age of 60. And technology has enabled this by simplifying the procedure.” According to him, the low capital expenditure, faster gestation period (turning profits within a year) and financial operating efficiency make it worthwhile for private equity firms to invest in the eye care sector.

The right prescription

When Arun finished his MBBS in 1991, he joined his family business of pharmacy trading. “Everyone objected to a doctor taking care of a pharmacy. I was not too keen on spending another 10 to 15 years studying a speciality,” he says candidly. However, from the beginning, Arun was convinced there was a demand for more healthcare players. “My family runs Vasan Medicals, which has 50 stores in south India, 15 of which are based in my hometown of Tiruchirappalli and each sees a good footfall. I felt the healthcare sector required more players. A couple of my friends and I joined together and started a large multi-specialty hospital in the same city,” he adds. Soon, Arun observed that there was a clear demand for day care speciality hospitals, which were simpler to manage and its businesses easily replicable and scalable.

“Eye care largely remained community work or run as homes or clinics with an independent doctor. I saw a need for a professional player,” he says. The first eye care centre was established in 2001 in Tiruchirappalli with a budget of Rs. 50 lakh and a modest space of 2,500 sq.ft. compared to the average 25,000 sq.ft. each eye care centre operates from today. It has always been Arun’s philosophy to hire the best local doctors than to source them from other places. “After the first doctor came onboard, it took me eight more months to convince the next one to join us. Many of them are wary of competition,” he says. Vasan now has 750 full-time ophthalmologists along with a staff of 8,000 employees. “The first five centres are always the toughest. You need to persevere through it,” he adds.

Spreading its wings

According to Balaraj, the Indian eye care market is pegged at US $ 2 billion to 4 billion and expected to grow at 10 per cent to 15 per cent. And with Vasan becoming the lead player in eye care with its wide network that spreads through New Delhi, Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Madhya Pradesh, Gujarat, West Bengal and others, it will soon be adding more to its list in the northern, eastern and western states. By September, both eye care and dental centres in Dubai, Muscat and Colombo will become operational. “I want to open more centres in other developing countries in Africa and also Taiwan,” he states. But his focus will still largely remain the domestic market for he believes he has not tapped even one-tenth of the market share. “I do not agree when people speak about competition in the healthcare sector. The industry needs more players,” he states conclusively.

Besides eye care and dental care, Vasan is hoping to enter into at least two more verticals like in-vitro fertilisation, skin care, urology, nephrology and orthopaedics, work on which will commence in 2012. The company is looking to raise US id=”mce_marker”50 million in the next three months to further fuel its expansion plans and is currently in talks with private equity firms and sovereign funds which Arun hopes to finalise soon. It is also considering making an initial public offering after June next year. “My immediate aim is to consolidate our centres in north India and enter at least two more verticals. We want to position ourselves as a leading day care health services company, not just eye care providers,” he concludes.