Dr. Velumani, a scientist turned entrepreneur, wants to scale up Thyrocare Technologies by focusing on the four-billion strong middle income to upper middle income group across the world
Dr. Velumani, founder and CEO of Thyrocare Technologies Ltd. (Thyrocare), a pathology lab for thyroid-related tests aims to provide quality services at affordable costs to laboratories and hospitals in India and other countries. With a clear target audience, which is middle income to upper middle-income families, this scientist-turned-entrepreneur has created Thyrocare with a focus on speed and accuracy. When we last wrote about Thyrocare in December 2012, it had closed FY12 with revenue of Rs. 108 crore. Since then it has grown well and closed the fiscal 2014 with revenue of Rs. 152 crore. “Due to slow economic growth and heavy dollar burden, we did not grow as much as we expected to,” admits Dr. Velumani. Despite the slower rate of growth, it has witnessed a good all round growth in various other parameters.
Incorporated in 1995, this Mumbai-based company’s single central laboratory offered tests at half the market price. This was possible because it was able to churn out large volumes while maintaining quality. While the company’s focus is mainly on thyroid tests, it does not contribute much in value. “Though Thyroid constitutes 67 per cent in terms of volume, it contributes to only 27 per cent of our total revenue,” says Dr. Velumani. Preventive care profiles (Aarogyam) is the engine of growth and it constitutes 40 per cent in value and 10 per cent in volume. And, tests like Hba1c (for diabetic) and Vitamin D have grown by 300 per cent in the last 24 months.
Making a difference
Dr. Velumani made a foray into radiology and oncology for testing cancer through Neuclear Healthcare Ltd. (NHL). But, he understands that while Thyrocare deals in vitro diagnostics, NHL deals in vivo, that comes with its own set of challenges. For instance, NHL requires local centers. So it involves low consumables and high capital expenditure in the form of real estate, while Thyrocare is about low capex and high consumables. Another significant challenge is that PET scans are expensive due to transportation of radiopharmaceuticals. To tackle this, Dr. Velumani has equipped centers with a cyclotron (a particle accelerator) that will ensure that the cost of each scan is minimised greatly. The company has now established three cyclotrons, one each in Mumbai, Delhi and Coimbatore, and three more are in the pipeline – in Kolkata, Ahmedabad and Bangalore. The company now has five PET-CT machines of its own – two each in Mumbai and Delhi and one in Hyderabad. In FY14, the company performed 1,000 scans and in FY15 it aims to do 10,000 scans.
In December 2010, Thyrocare received its first round of private equity funding from CX Partners to the tune of Rs. 188 crore for a 30 per cent stake (partly liquidated its stake to ICICI Bank). In September 2012, it raised Rs. 120 crore from Norwest Venture Partners for a 10 per cent stake, and some of the funds raised have been directed towards NHL. While the company is not looking at raising capital again in the near future, he adds, “If we wish to be aggressive, we should dilute. We would be reviewing it after Q4 of 2014-15.”
All round growth
Since the last time we spoke to Dr. Velumani, Thyrocare has grown well in various parameters. For instance, with respect to automation, it has installed Aptio, a Total Laboratory Automation (TLA) device, at a cost of Rs. 20 crore which sorts, opens, tests, closes and archives vials without any manual inputs. “It is a first of its kind in the world, if we consider the length of the tracks,” clarifies Dr. Velumani. It connects 50 analysers and can process 10,00,000 investigation technologies in a day.
As far technology goes, the company has introduced a technology called ICP-MS, which is used for screening toxic elements and has employed four such machines on the floor. It has also included LC-MSMS (a chemistry technique) for steroid analysis and vitamin analysis, and has employed two machines for this task. In this last two years, instruments worth Rs. 20 crore have been brought to the floor.
As far as its market penetration is concerned, Thyrocare now gets samples from 20 countries and from 120 clients abroad. And, it has a full-fledged, functional Centralised Processing Laboratory (CPL) in Bangladesh and Bahrain. The company’s volumes have grown well too. In the last two years, with respect to number of investigations, it has grown from 80,000 per night to 1,80,000 per night, mainly due to the growth in the preventive care profile.
The company does not have many corporate tie ups at a national level as its model does not allow it to. Dr. Velumani explains, “Corporates want X-rays, ECGs and other services which we do not offer. So, almost all hospitals that we have corporate tie ups have tied-up with our franchisees.” He adds, “Of course, big brands which have enough to spend go to such hospitals and pay Rs.10,000 for what is available at Thyrocare for Rs. 1,000.”
Clear target audience
And, such a customer base is not his focus for Thyrocare. In the pyramid of Indian economy, he visualises 10 slices and wants to place his brand for the population falling under the slices three to seven. “People who fall under slices one and two do not have a cap on spending and fall under my competitors purview. People in slices eight to 10 cannot be serviced by private entrepreneurs since it is the job of the Government to first give them food, living and then healthcare,” says Dr. Velumani in a matter-of-fact tone. He sees four billion people out of the eight billion population in this earth in his space. “I would be happy if I can reach them from Shanghai to Los Angeles,” adds he.
And, to gain such scale, Thyrocare is concentrating on building its marketing workforce, which has grown from 400 to 500 people in the last two years. However, this growth has come with its own set of challenges. “Hiring people, training and retaining them is a challenge in any industry and more so in healthcare. We are putting an extra effort and would like to increase the count to 1,000 by April 2016,” states Dr. Velumani.
Riding on a strong market potential
“India is becoming richer, older, wiser, lazier and cheaper – that makes healthcare a high growth industry for the next 10 years,” states Dr. Velumani. He adds, “If things go right, the industry may grow at a 20 per cent CAGR and organised players may grow at a 30 per cent CAGR.” The industry has around 60,000 laboratories out of which only 600 are adequately accredited. Brand and quality consciousness coupled with an increase in demand for preventive care has helped organised players gain traction in the past and will continue to do so in the future. “Competition creates new markets and that would be the biggest trigger, apart from overall growth of the sector,” says Dr. Velumani.
This apart, the company has established a strong franchisee network as well. Over the last two years, the number of franchisees has grown well, which was a big challenge earlier. Dr. Velumani explains, “All players now understand the game and similar proposals are being given for aspiring entrepreneurs. However, we have managed to grow from 600 (a number which did not grow for three years) to 1,000 within four months.” And, according to him, the reason for this growth is simple: it shared more margins with them.
The company has also expanded globally. It has set up centers in Bahrain and Bangladesh at an investment of Rs. 10 crore which it funded through internal accruals. “Five years from now, I would like to add a zero to our topline and bottom line. For this, I must have one more zero in number of employees and number of square feet, needed for processing the specimen and to house the staff,” says Dr. Velumani. He has established a clear USP for Thyrocare in the industry. “Single lab, as a result assured quality; cheapest in India; fastest because of air cargo logistics; best in preventive care packages, and world class automation,” concludes he.
|Number of investigations; 80,000 per night
|Number of investigations; 180,000 per night
|In December 2010, received first private equity funding from CX Partners for Rs. 188 crore for a 30 per cent stake. In September 2012, raised Rs. 120 crore from Norwest Venture Partners for a 10 per cent stake.
|CX Partners partly liquidated its stake to ICICI Bank
|Marketing workforce : 400
|Marketing workforce : 500
|Revenue in FY12: Rs. 108 crore
|Revenue in FY14: Rs. 152 crore
Number of tests the lab process in a day: Touched 2,20,000 investigations in a peak day in March 2014 and the year average is around 1,80,000 in a night
Number of franchisees: 1023 franchisees in India and 320 in Bangladesh, GCC and Mena countries.
Number of cities present (in India): 700