In good health

WITH growing privatisation and more and more players in the organised space, people are becoming more conscious towards their health. This has led to considerable rise in the diagnostic/testing labs in the country. Owing to the competition posed by locally run diagnostic labs, organised labs are coming up not only in metros but in smaller towns/cities.

Business potential

As per research analysts, the Indian diagnostic market is estimated to reach Rs 116 billion (US$ 2.4 Billion) in 2010 on the back of strong investment patterns and emergence of tier II and III cities as growth hub. The market is further likely to grow at CAGR of 16 per cent till 2012. The diagnostic sector is highly fragmented and only 10 per cent of this sector is placed in an organised space as it is growing at twice the market growth. The industry's growth can be gauged from the fact that most of the medical treatments are based on the tests performed or conducted by the labs. The healthcare industry prefers to tie-up with business partners who belong to the medical vocation only, as it requires hands-on-experience, precision and errorless procedures. As hospitals do not provide the core lab test facility, so they usually outsource it from outside, as it is more cost-effective. But as the demand is growing day by day, hospitals and other clinics are diversifying into segments that help in catapulting the patients to get treated for various health problems under the same roof.

Other growth mechanism that has propelled the sector's growth is the rise of medical tourism, increasing corporatisation in the healthcare business, capturing the unserved markets with high potential, changing consumer lifestyle, disposable incomes, sedentary lifestyle diseases, high profitability and government's initiatives.

To tap the market space rapidly, big players are diversifying into other related business segments in order to provide group of quality services to the patients. According to Om Manchanda, CEO of Dr Lal PathLabs, “Diversification is a growth strategy for many brands, but when you diversify you need to be sure that the diversification is aligned with your core strengths.”

Franchising scope

In the healthcare sector, areas such as cosmetology, trichology, body sculpting, eyecare, physiotherapy, ayurvedic medical treatments, spine care, dental care and pathology labs are offering business prospects mainly to investors who belong to the medical profession. Franchising is increasingly being accepted by hospitals, clinics, diagnostic labs, collection centres and pharmacy stores too.

In a move to encourage entrepreneurship as well as to penetrate rapidly into small tiers of the country, franchising has been the ideal choice for brands to mark expansion with easy accessibility for consumers, minimum capital expansion and low property rates. Talking about franchising's viability in the healthcare sector, Manchanda notifies, “Diagnostics is a retail network business to a large extent and scale as well as reach are very important. The collection centres need to be conveniently located, accessible and visible to create consumer awareness. Franchising helps to get coverage and reach but one needs to ensure the service is never compromised.” Healthcare sector demands high proficiency in terms of cluster of quality services being offered to the consumers and fulfilling their needs. And, if one is operating a franchise centre, it's pertinent for the franchisee to offer identical services to the end consumer because the proven system has already gained consumer's trust and loyalty.

Spreading wings

To seek aggressive growth opportunities, big industry leaders are partnering with PE investors, as they get the easy availability of cash flow.

After realising rising health concerns in smaller parts of the country, organised players have taken a leap ahead to fill the gaps by ensuring presence in such cities to offer quality service and fulfilling the need by opening organised clinics, diagnostic labs, collection centres and pharmacy stores. Commenting on trichology industry’s future prospects, E Carolin Praba Reddy, Chairpersom of VCare Group, claims, “The trichology industry is expected to grow multifold in the coming years with the development of new treatment methodology and diagnostic technique and after care products. VCare is planning to create a niche in the trichology segment through the introduction of wide range of home care product and home care treatment strategies.” On the other side, Manchanda states, “Diagnostics is one of the fastest growing segments in India today within the basket of healthcare and it holds a lot of promise and business opportunity potential for all stakeholders.”

Speed breakers

Most of the franchisees think that franchising is the scripted pill and they assume that quick success is assured once they take up any big brand's franchise. But this is not true. Big service providers face challenge from neighbourhood run clinics and unorganised players, who adversely affect the system's credibility by offering cheap solutions and put tremendous pressure on pricing and margins. Shortage of skilled manpower, recruiting, providing training and retaining qualified doctors/other staff are some of the major challenges that the healthcare industry is going through. The brand's appeal is also being hampered by unqualified franchisees who fail to offer the standardised services to the customers. VCare strongly emphasises on recruiting skilled professionals through campus interviews, HR Consultants etc. VCare runs a training academy which is greatly helpful to train the new recruits. Apart from this, VCare recruits Trichologists and beauty therapists who have successfully completed their certification from VCare Academy. To confront such challenges, the franchisor should endeavour to provide proper training and support to franchisees and also conduct timely audits to keep a tab on franchisee's performance.

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