Wellness centres: Swell proposition

HOT SECTORS

Wellness centres have become serious business over the last few years. The concept of wellness has expanded from a couple of centres offering beauty treatments and state-of-the-art gym facilities 10 years ago.

The growing demand for Ayurvedic preparations, massages and cleansing treatments has spawned a gamut of total wellness centres that are doing very well.

Kottayam Aryavaidya (KAV), Bandana's Curls and Curves (BCC), Mokshamo, Mohenjodaro Ayurvedic Centre (MAC), Ati Ananda Spa (AAS) and Rani Mukherjee's Total Fitness are the prominent listed players in this segment.

A lot of Indian and international corporates have tie-ups with these wellness centres where executives avail themselves of authentic ayurvedic treatment such as panchakarma, ayurvedic detox and specially formulated ayurveda packages for rejuvenation, beauty and weight loss.

Apart from these, the centres also offer ayurveda courses as well as vastu and ayurvedic cooking.

In fact, a number of corporate offices have small branches of these centres in their premises, which double up as cafeteria, serving detox diets and health food. The centres also offer consultancy services for vastu in upcoming constructions.

Apart from corporate demand, players like KAV and MAC have substantial business flows from their core business - specific ayurvedic therapies.

Here serious health problems, including digestive disorders, obesity, allergies, circulatory problems and neurological conditions are treated by patented ayurvedic methods of the centre.

Although AVS has ventured into the highly lucrative area of rejuvenation and healthy living resorts only about six years ago, KAV, AAS, MAC and Starling Ayurvedic resorts have been thriving in the last 10 years.

All these centres have good international networks, which bring in a bulk of the revenues. However, in the last two years, there has been a change in the trend with a growing number of international clients joining the health tourists who arrive in hordes, especially in Kerala.

However, the Kerala state government has lamented the uncontrolled growth of what it calls Coca-Cola ayurveda, wherein every hotel, motel, guest house and bungalow along Kerala offers herb-infused ayurvedic massages.

The ministry has confirmed that stringent laws will be passed soon, which has been hailed by the umbrella organisation - Group of Ayurvedic Service Providers (GASP).

Apart from these, Mokshamo, BCC and Total Fitness are basically fitness centres based on a vedic theme and a local feel, with more emphasis on 'sattvik' food and fitness.

These centres have state-of-the-art gyms, spas, beauty parlours, oxygen bars and group activity studios where members attend courses ranging from yoga and the Art of Living to aerobics and taekwondo.

Analysts estimate that the total wellness centre market would be currently worth $6.7 billion, and is expected to double in the next two years as more international corporate demand picks up.

Stock prices and market caps of the centres have rocketed, particularly in the last three years. "Its like a herd mentality," says a prominent analyst.

"Although people had earlier dismissed the growth of these centres as an unsustainable fad, the increasing national and global penetration of the industry has caused an about-turn in their outlook."

Truly, the wellness concept has taken off and its pervasiveness can be gauged from the 'wellness' in the balance-sheets of these companies.

Biotechnology
The biotechnology sector has outperformed most of the major sectors in the last three years. The industry's meteoric growth could be attributed to the huge funding that has seeped in over the last 10 years.

The BSE biotechnology index has grown by a whopping 180 per cent in the last year, with the BSE Healthcare Index coming a distant second with a 120 per cent rise.

The stalwarts in the field - Santa Biotech, Biokaun, Biomedian, Genome India, Oseemum Biosolutions, Biogene and Advance India - have grown 30-60 per cent in the last year.

However, analysts caution about the hordes of companies rushing into the sector and firms with not much exposure to biotechnology adding a bio-tag to their names.

"Investors should be careful about early-stage biotech," says an analyst. "A company must have good science, strong management, ample financing and a lot of luck to get its products approved and to market," he adds.

However, they agree that the reason for the huge appreciation in stocks of established biotech players is their robust fundamentals.

Analysts say that maximum growth is currently concentrated in companies with exposure to bioinformatics and biopharma. There is a global shortage of over two million professionals in bioinformatics, which are rapidly being filled in by Indians.

The world-class software industry in India has worked to attract global investment in bioinformatics. Training is another area which has worked for companies providing bioinformatics solutions like Oseemum Biosolutions and Harris Biosolutions, which offer training programmes in partnership with prestigious international Universities.

Biopharma has international giants like Dr Reddy's and Ranbaxy making good progress after taking initiatives in the field nearly 10 years ago.

Biopharma products are becoming the most powerful pharmaceutical agents for some of the deadliest genetically-linked diseases and cancers. Biokaun, Santa Biotech and Genome India are the other successful players in the field.

Analysts expect the bioagriculture field to drive industry growth in the next five years, with entrepreneurs looking to repeat the huge success of Bt-cotton.

The advent of high-yielding, genetically-modified (GM), pest-resistent crops by the likes of Biogene also augurs well for the sector, feel analysts. Many funds are focusing on biotech. Vanguard India Healthcare (VIH) and Vanguard India Life Sciences (VILF) are closed-end funds that offer skilled stock-picking.

Vanguard's analysts focus on small, publicly-traded biotech companies as well as private companies, which make up more than 30 per cent of the stock assets of each fund.

"The potential for an explosion in growth is greatest among the small companies," says Jolly Roger, head (strategy) of Vanguard India. "We can find companies in places that other people haven't looked."

The funds have outperformed the Sensex and Nifty over the last five years. VIH is ahead of the S&P CNX Nifty by an annualised 25 per cent over the last five years while VILF is ahead by 22 per cent.

VIGNETTES 2015

ITC bids for BAT

ITC Ltd has made a bid to acquire a majority 51 per cent stake in BAT, in a dramatic twist to the relationship between the two companies. ITC has agreed to a consideration of £5,000 million in a part stock, part cash deal.

This puts BAT's value at around £10,000 million, less than half its value around 10 years ago. BAT's valuations have been constantly on the decline, owing to unexpectedly huge punitive damages paid by the company to smokers who claimed to have been misled by its tobacco advertising. ITC, on the other hand, has seen steady growth, thanks to the diversification strategy it had put in place 10 years ago.

Tobacco accounts for less than 50 per cent of ITC's sales and profit, and it is present in almost all consumer goods categories from tea and biscuits to soft drinks and stockings.

The only issue for ITC is getting a clearance from the EU, since it would become the largest tobacco player in the continent after the take-over.