Dr. A Velumani has made Thyrocare a front runner in the healthcare industry by being a disruptive strategic player laboratory. A visionary in the field of clinical biochemistry, he has worked on volume more than the profit and has established a unique business model. Though he was a mathematician in his early academic life, he later did his Masters in Thyroid Biochemistry and PhD in Thyroid Pathophysiology. While working for the BARC, Dr. A Velumani in 1995, understood that the comfort zone of being a government officer could be a danger zone for growth. Hence, he quit his job and set up this unique and disruptive business in 1996. Being born and brought up in a low-income farmer’s family, Dr. Velumani’s early life experience fueled his desire to start an affordable enterprise for the vast populace. In a country like India with population in billions, reach of healthcare services especially in the remote parts of the country is poor. His focus is on the slice numbers 3, 4, 5 and 6 in the economic pyramid of 10 slices in India.
With just an initial investment of 1 lakh rupees, which was also utilised to get the first gamma counter (ECIL) for thyroid testing, Thyrocare today is worth 3,000 crore and is the world’s single largest laboratory for thyroid testing, handling more than 50,000 samples and 2,00,000 tests a night.
Thyrocare, the biochemistry focused laboratory as he differentiates it from pathology peers is known to be the trendsetter using IT, HR, logistics and automation. Having a mathematics background, he looked at pathology as “Numerical Pathology”. Thyrocare is the first Indian laboratory to have installed the Total Laboratory Automation from Siemens in its lab floor. Currently, the 2,00,000 sq.ft. lab space has a new Aptio automation, also from Siemens, which is a complete laboratory automation solution, the world’s longest, for preanalytical, analytical as well as post-analytical operations.
Long back, Thyrocare was also the first lab in India to start the use of barcodes for samples. This year in April, Thyrocare came out with its IPO, which got subscribed 75 times. In this interview, we try and find out the reasons that makes Thyrocare this popular as a business brand. Excerpts…
Why did you plan an IPO?
We had a PE partner, who had come to an end for his fund period and wanted to liquidate his stock. We felt that IPO is an ideal route, since the company had completed 20 years and it was time to become public.
It got subscribed 75 times. What is the reason for this popularity?
It was a surprise to me too, indeed. There are a few reasons as outlined by our merchant bankers, which are: our business model, concept – focus on biochemistry, wellness (scalability), not too much is available in the diagnostic space for an investor’s appetite (scarcity value), we have had a 25% CAGR for pretty long 10 years (growth), also our balance sheet had an EBIDTA of 40 plus or minus 2% for a long time (profitability), the company was cash rich in its business, and had not had debt on it anytime (health).
Thyrocare was looking to raise upwards of 451 crore. Your plans with this money?
Thyrocare on paper was raising funds but actually it was a secondary deal (Offer For Sale, OFS), where no money comes inside the company. The outgoing PE partner took all the money and also it is important to note, company on its balance sheet had enough money for its expansion plans if it needed. We in fact declared dividend to our investors, pre and post IPO since the funds were lying idle on the balance sheet. Having said that, company has plans to establish 20 Regional Processing Laboratories (RPL), back-end kitchens, not front-end restaurants, in the country over a period of 4 years from January 2015. As of now, we have 6 of them working with full capacity at Delhi, Kolkata, Bangalore, Hyderabad, Coimbatore and Bhopal. This industry revolves around quality, cost and speed – as yardsticks and using RPL we are addressing speed improvements for tier 3 and 4 towns. Additionally, more than 30,000 specimens in a single floor gives no further advantages and hence we are working on multiple floors to process in our journey to 2,00,000 specimens a night.
Thyrocare has grown from strength to strength in the last few years. What attributes helped the company achieve such a performance?
It is uniqueness of the focus in metabolic disorders, chronic illness, preventive care, and wellness. In 1995, when I came into this industry, I did not see anything known as preventive care. I noted that in developed countries, preventive care was more than 50% and I knew in emerging India, it has to also become 50% one day. I focused on Aarogyam – a brand in wellness. For Thyrocare that has been an additional growth engine, and today in our balance sheet more than 50% of revenue is from Aarogyam. Neither our name, nor our core focus communicates us as a player in pathology or in sick care segment. In fact, the biggest strength of this model is – we removed two slices out of three – that is core pathology and microbiology from family of ‘pathology’ and focused only on one slice of ‘biochemistry’, which is an idiot proof, scalable, fastest growing cash cow. There is no such focused business model anywhere in the world.
How do you fight competition?
There are two kinds in business. One sees competition, other sees an opportunity. In a country of 1.25 billion population, there are only 4 national players – for the last 20 years. We need 20 national players to say there is a competition in real sense. Right now, it is a competition between the organised 100 players and the unorganised 1,00,000 players. Ironically, in a space where I am, biochemistry, the conventional advantages of quality, cost and speed do not really help much because it is pretty much the same for all those who use reagents and analysers – Siemens, Abbott, Roche or Beckmann. What mainly help us to stand tall, even today are:
Volume benefits: To tell in short “Without this volume this rate is not possible. Without this rate, this volume is also not possible”. We process in a night 2,50,000 investigations that gives us a lot of advantages in purchases, floor costs, asset sweating, IT costs, accreditation costs, and more.
Branding benefits: It is our investments in Thyrocare, Aarogyam in last 10 years that gets doctors,hospital administrators, lab administrators, common man to think – Thyroid means Thyrocare, Wellness means Aarogyam. We have invested so far more than 100 crore in brand building.
Focus: That gives volume, height, visibility and attention. In fact, if any one senses competition that means he has not focused adequately.
What kind of marketing initiatives do you use?
Keep rates – ALARA, get volumes AHARA. ALARA means As Low As Reasonably Achievable and AHARA is As High As Really Achievable. It is such a powerful disruption that competition has to amplify their marketing budgets to sustain their growth.
Kindly tell us a bit about the CSR angle of the company.
There are three kinds of CSR that we do:
Give jobs to freshers: About 98% of employees in our organisation have Thyrocare as their first employer. We train them so well – within a short period, they get tempting salaries with our competitors and vendors. It is my wish that globally in every diagnostic lab, a Thyrocarean should lead.
Serve the poor: In the entire world, India is the cheapest in healthcare, and in entire India, we are the cheapest. Thus it is, by its design, a social business. We do Thyroid tests at 60 for many organisations that serve the poor.
Do as company law suggests: Two percent of net profits are put into education, skilling, poverty and old age supports.
Dr. A Velumani’s take on the top 5 business strategies of Thyrocare
Focus: Pathology is too big to claim that I am good at doing entire pathology. This was a bold strategy to start a business “All in Thyroid and only Thyroid” in 1995. We do not focus on infection, sick care or pathology. That has differentiated Thyrocare from the rest of 1,00,000 players.
Do not compete with your clients: For us, 90,000 laboratories are potential clients because we work on a B to B business model, for volumes. We did not focus or sell blood sugar, CBC and lipid profile, routine kind of tests, which are bread and butter for local small laboratories.
Do not put a kitchen for every restaurant: This means testing at each location where blood collected brings down the productivity of analysers due to lack of volumes and that results in inefficiency in floor. Till January 2015, we operated a single floor at Navi Mumbai for the entire billion population.
Take less to get more: We disrupted the industry twice. In 1995, BSNL and MTNL got disrupted by Vodafone & Airtel. After 20 years in 2016, Reliance Jio disrupts Vodafone & Airtel. Like that our industry also had disruptions and I have done majority of them. The fact is “If you do not disrupt, you would be disrupted”.
Worked on HR, IT and Logistics: Mean age of employees at Thyrocare is the lowest in this industry, our webserver is the oldest in healthcare industry and we are better than Bluedart or Fedex in logistics. These three are in fact reasons for all unicorns – in this last 20 years.
Mission of Thyrocare