 "Dr Amar Agarwal, Chairman and Managing Director, Dr Agarwal's Group of Eye Hospitals")
A little over one-third of India's population is afflicted by some form of eye disorder. Experts say, over 80% of visual impairment is preventable or treatable, which gives a good business potential for developing eye care delivery centres in India.
To tap this opportunity, Dr Agarwal’s Eye Hospital, a Chennai-based eye care chain, plans to invest Rs 600 crore for the expansion of its facilities in India and abroad. The company, which currently has 60 hospitals, plans to have around 200 hospitals by 2020.
The company aims at being a pan-India player by 2020 with a turnover of around Rs 1,000 crore and as a short-term target, i.e.2016-17, it is eyeing around Rs 500 crore.
Traditionally focused in South India, the 49-year-old firm has chalked out plans to spread out in northern parts of the country and globally as well. It is looking at a hub-and-spoke model and is said to be open for inorganic growth.
The company recently entered the Eastern market by opening a hospital at Kolkata. Meanwhile, on the global front, it has 14 hospitals in Africa, one in Cambodia, one in Mauritius.
Dr. Agarwal’s growth strategy includes expanding their hospital network in Africa and entering markets like UAE, Sri Lanka, Vietnam and Philippines. On the domestic front, the group will consolidate its presence in existing states and will be setting up new hospitals in Kerala, Gujarat, New Delhi, Maharashtra and Punjab.
“Our Vision 2020 is to strengthen the brand and double the number of hospitals with footprints across India, Africa, Middle East and South East Asia,” said Dr Amar Agarwal, chairman and managing director, Dr Agarwal's Group of Eye Hospitals, adding that funding will not be an issue. The company, which has around Rs 25 crore of debt, said that other mode of funding would be debt and internal accruals. Recently, it raised $45 million from ADV Partners to fund the expansion.
In addition to this, Dr. Agarwal’s Group, with more than 30 eye care innovations, will also be investing in eye care technology to bring in the advanced global practices to service its patient base across the network.
As part of brand-building, the company is planning to convert the interior of all of its hospitals look similar, regardless the location of the facility. “We have got an architect from Mumbai, to make all the hospitals’ interiors look alike, to create a bigger branding. A hospital in Porur (in Chennai) and a hospital in Africa, you will see the same interiors," he said.
However, expansion of hospitals has its own challenge, mainly maintaining the quality of service. Adding new hospitals would require more manpower, especially doctors and that is the bottleneck for the companies to grow fast, if it values its brand. It will have to make sure that the quality of service available in its hospital in Africa and in India the same and it would require a calculated, systematic and scientific growth, he added.
Agarwal claims that on an average foot fall across the hospitals is around 10,000 and similar number of surgeries are being carried out.
Taking on peers
Dr Agarwal’s said that intense competition from new ventures results in undercutting of prices and many of its competitors attempt capturing market by offering similar treatment through use of primitive technology. This can significantly impact company's bottomline. However, the company believes that in the long run, quality is the sole consideration and has never compromised on its ability in inducting high end, state-of-the-art technology.
The eye care chain is said to be utilising a dedicated research & development function, which develops near term and incremental improvements, as well as step change improvements to existing procedures and processes, resulting in minimal obsolescence.
One of the major strength of Dr Agarwal’s is quality and innovation, Agarwal said, who claims they were the first one to use technologies including PDEK and Glued Intraocular lens (IOL) when it comes to eye care in the World.
An analyst who tracks the company said that Dr.Agarwal's Eye Hospital is trading at 1X revenues whereas some of the larger companies in the healthcare space are trading at much higher valuations. With single-specialty hospitals getting lot of investor interest, and with these expansion plans, can one expect a potential rerating of the stock?
Eye care market
According to CRISIL Research, eye care delivery market is set to grow by 14-15% CAGR over 2012-13 to 2017-18. Cataract surgeries will account for majority of eye surgeries in India. It also estimated the eye care market in the country is worth around Rs 12,000 crore in 2013-14 and is poised to grow to Rs 23,600 crore in five years, according to reports.
The emergence of eye care networks endorses this growth prospects.
Eye care chains, predominately private ones, were focussed mainly on the geographies where they had their strength. Except for one or two chains like Dr Agarwal’s and Vasan Eye Care other did not spread wings across the country.
It may be noted, Vasan Eye Care, once a darling for PEs and VCs including Sequoia Capital, GIC (formerly Government of Singapore Investment Corporation) and others, is going through a rough time due to high debt and according to industry sources, they were too aggressive in the expansion. According to the company website, it has opened around 175 super specialty eye hospitals as on 2013.
Other regional players in the eye care sector include Shankara Nethralaya, Arvind Eye Care, Lotus Eye Care and Akshara Eye Hospital.
