Dr. A. Velumani’s Personal Blog

Those who want to lose will never lose but those who are afraid of loss will never gain!

Dr Arvind Lal, Congratulations.

Dr Lal Path Lab Limited, Delhi based pathology laboratory (LPL), the senior most player in the space, the most profitable in the laboratory industry has become a public listed company in December – 2015. In Indian healthcare industry, there was no listed company in Diagnostic space till date and hence LPL becomes the first Indian public listed company, with a value of approximately 1 Billion USD. The IPO which was made for giving exit to existing investors got over-subscribed 33 times.   For all in healthcare space that should come as happy news because this says how eager, keen and crazy are investing community in this space. Single factor that motivates is the multiples that a pathology laboratory has which is much more than that of a hospital.

The valuation expectation by the company, though many say is in higher side, it is proved to be fair or under-valued by the company proved by the fact that share prices went up by 50% within 2 days after the opening day. What does this say – Dr Arvind Lal diluted the company in right time with right kind of investors who added value to board, a right CEO who added strategies for growth and in 5 years, it made every effort to retain its number 1 position and also chose a right time to come to market and en-cashed the best out of the industry to lead the industry for decades. I wish to congratulate the entire team in LPL for having reached there. No doubt, all was worth waiting for more than 7 decades to ring the bell at Stock Exchange.

What is good about this space according to investors? ROCE – Return On Capital Employed is the most attractive in this space of healthcare (unlike Radiology or Hospital space) and it has great future. They see clearly what prosperity lies when the mean age moves from 28 to 38 in next 20 years in India.  Going to public in healthcare would become very motivating and we see two Bangalore based hospitals already there. Narayana Hirudhyalaya, inspite of an able and visionary leader could get only 3 times oversubscribed and is yet to ring the bell in stock exchange (while I write this). Another hospital, HCG Oncology run by a dynamic leader, Dr. Ajay Kumar is waiting for a new year to take the runway. Both are hospitals and when we discuss with investors, they say – multiples are less for hospitals compared to pathology laboratories. Again the reason is nature of business that demands a huge capex. ROCE is not impressive they say.

What is now expected? Not in ours, in every industry, people follow successful models and strategies. Though it took many decades to see the first listed entity, there would be 10 listed companies in pathology space in just 5 years.  Even a small laboratory, with a CEO who can take risk can go ahead and create an impressive business model or agenda, with the right kind of “IT, HR and Logistics”. Once he is seen growing, investors would give funds to fuel growth and he can become a state player with a 20 to 30 crore turnover. Then next round of funding can take him to a national level. I personally see many with space, knowledge and capacity to become national, but almost all of them are risk averse.

My Inputs for emerging CEOs of laboratories:

“Jo Khona Chahta hai Woh khabhi Kuch Khota Nahi. Lekin, jo Khonese darta hai – Woh kuch Paata nahi.”

In English – Those who want to lose will never lose but those who are afraid of loss will never gain.

And also I want to say,

Romance with Risk – it pays; but if you “Risk with Romance – it would be costly

Focus, Learn, Grow and Enjoy.

I wish all a very Happy and Prosperous 2016.

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