There are reasons, however, why things could just click for these protagonists. One, many of them are in specialties such as ophthalmology, day-care surgery and dialysis care involving lower capital expenditure. For instance, a cardiac hospital or a multi-specialty tertiary care hospital costs an average of Rs 60-70 lakh per bed, excluding the real estate cost, says Singh of Technopak. That works out to Rs 60-70 crore for a 100-bed hospital. Cash break-even typically takes about three years.
But the set-up cost for these specialties per centre would be within of Rs 10 crore. An important factor is that in-patient stay is rarely required since a number of these are day procedures. This minimises the need for support infrastructure. As a result, cash break-even can be achieved faster, usually under a year. Real estate “is not a relevant component for specialty”, says V.T. Bharadwaj, vice-president of Sequoia Capital, which invested in Vasan Eye Care, a chain of eyecare clinics, last year. “You just need a good location, rent it, and start growing.”
...The other advantage is the opportunity to partner with MSHs. One, for a number of these specialties, the cost per procedure is in the tens of thousands rather than the lakhs spent on cardiology, or joint replacement. It is not feasible for MSHs with their high overheads to offer them. But what they can do is farm them out to be run more efficiently by these niche providers inside the hospital premises. For instance, RG Stone runs the urology and laparoscopy centre in some Fortis hospitals. Two, a specialty such as cancer requires high level of expertise and investment that not all hospitals can afford. Here too it can partner. HCG, for instance, runs the cancer department in Delhi’s Shanti Mukund hospital.
Others like medical equipment maker Trivitron run by G.S.K. Velu, are forging JVs with a single corporate hospital. Alliance Medicorp, a JV between Trivitron and Apollo Hospitals, provides renal dialysis to patients awaiting kidney transplant. The target audience are people who are not critically ill but can lead a normal life provided they come in for dialysis a few times a week. A case in point is diabetics, whose sugar levels have impacted the kidneys. “Such patients would rather not go into a hospital and be clubbed with those fighting for life,” says a Trivitron manager at the Apollo Sugar & Dialysis Clinic, the JV’s first in Chennai where patients can undergo dialysis in a soothing and private ambience.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at email@example.com