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Oct, 12 2010

Diagnosis of pathology industry

THE pathology industry plays a major part in the healthcare sector. Its growth can be gauged from the fact that more than 70 per cent of the medical treatments are based on lab tests. Thus the sector asks for zero level of errors and high-quality consciou

THE pathology industry plays a major part in the healthcare sector. Its growth can be gauged from the fact that more than 70 per cent of the medical treatments are based on lab tests. Thus the sector asks for zero level of errors and high-quality consciousness. Owing to this, the sector asks for players from medical background, who can understand the seriousness of the business.

 

Business potential

The pathology industry is estimated to be Rs 10,000 crore industry, with most of the market being still unorganised and unprofessional in nature. Increasing private participation in this sector has led to the emergence of organised players eyeing a share of this sector. Even large hospitals are entering this segment given its growth size. Increasing health awareness, increase in clinical trials, quality consciousness amongst urban India led to the growth of this sector. In fact, India acts as a major outsourcing hub for clinical trials. The industry is highly competitive with referrals acting as major business earners.

Dr Lal PathLabs presently has 45 labs across the country and 750 collection centres in place. Dr Lal PathLabs has been the pioneers in diagnostic services since 1949. SRL Religare offers 4,000 kinds of tests at its labs and holds 10 per cent market share of the pathology industry. Though SRL Religare has acquired major laboratories in the past, Dr Lal PathLabs has stayed away from this growth channel.

 

Flip side

The sector poses lots of challenges, as there is no government regulation for the local labs and no quality control is there. A major risk in operating this business is any incorrect test or delayed report, as tests play a critical role in medical treatments. It poses major risk of reputation, hence the organised players provide the right training and support to the franchisee to perform these tests under strict guidelines.

 

Franchisability

A franchisor's wide network and brand name helps you in getting the right customers. SRL Religare supports the franchisees through sales and marketing team. A lot of companies at times stay away from the franchise set-up as they have to partake profits with the franchisees. SRL is now focusing equally on company-owned centres. Says Rakesh Walia, DGM, Franchisee and Sales & Marketing, SRL Religare Laboratories Ltd, “The franchisee needs to invest Rs 70-75 lakh in the franchise. One of the most important factors that we look for is the franchisee's attitude towards the business. He should preferably be well-educated and be from the same background.”

 

Expansion

Diagnostic service providers have realised the lack of quality labs and collection centres in smaller towns. So next on the radar are tier II and III towns for expansion. SRL Religare is looking at penetrating all the untapped areas. It looks at location with medical presence and available parking space.

 

Exit option

According to Walia, “A franchisee cannot resell the business. We prefer to give the first option to buyback the business set-up at market value. If that is not acceptable to the franchisee, he can sell only the equipments.” SRL presently has 900 collection centres and 60 labs nationwide. Out of its collection centres, around 90 per cent are franchised.

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