HealthCare Global Enterprises (HCG) has been one of the fastest growing cancer care network in India is very soon going to launch around five new centres. After the IPO, the companies has scaled up its expansion and has plans to set up its cancer care centre in Africa. Dr BS Ajaikumar, Chairman & CEO, HealthCare Global Enterprises shares the company’s growth story and plans for 2017-18 in an interaction with Raelene Kambli
You launched your first hospital in 2005. What did it take to finally make that decision? Once you had made it, what were some of the steps you took to learn the business skills?
Back in the early 2000s, we realised that the delivery of cancer care was poor in India, and so were the clinical outcomes because of low use of technology. We were aware that India was a poor country, unable to afford quality cancer care – all of which created a perception amongst people that cancer was a disease to be feared. To me, these reasons were unjustifiable. The growing number of cancer patients required more attention to make cancer care both accessible and affordable, and we felt that the government alone was not in a position to deliver such care in India. It was clear to us that private enterprise had a big role to play and could penetrate most markets.
Around 2003-04, I returned to India and set up the hub and spoke model shortly after that, in 2005. From a business angle, we had to make our model viable and we turned to private equity. There is always the concern that equity is more expensive than debt – which is true. Debt, however, is like a sword hanging over your neck, while in the case of equity, value is created for the investor. Keeping this in mind we chose equity. Although dilution is a fear with equity, it did not matter to us because our goal was not to make it a business but a social enterprise, by using our business acumen. These are some of the bold steps we took to make HCG a successful venture. We then opted for more private equity to expand across the country, got ourselves a good name, increased our transparency and were able to successfully go public as a cancer care provider – something that was completely unimaginable a decade ago.
You’ve built a fast-growing business-India’s largest cancer care network. What was your strategy in building a business so rapidly, especially in cancer care? What were some of the steps you took?
Some of these steps I have partly explained above, our main strategy was that the business can and should go ahead based on the need and the opportunity. Cancer in India was increasing significantly, and from our experience it was clear that cancer, as a lifestyle disease, would increase to epidemic proportions. So, we decided to build a hub and spoke model, the hubs being centres of excellence and the spokes in partnership with doctors and experts, in big cities as well as in tier II and III cities, extending cancer care expertise to a larger public. In just 10 years, we have been able to set up over 20 comprehensive cancer centres in India and make cancer care affordable even in tier II and III cities like Vijayawada, Ranchi and Kanpur. This kind of expansion hasn’t been done globally, and has been possible through our hub and spoke model, centralisation of services, and our partnership model with doctors.
What have been some of the most strenuous challenges that you have faced? How did you overcome those challenges, and what did you learn from them?
The first challenge for us was to create a model with the knowledge and the technology needed to address a disease as complex as cancer. Some of our questions back then were: how do we bring in the funding finance, and how do we create a hybrid financing model where there is equity and debt, which as I have explained earlier, is a challenge we overcame. The next challenge was to identify where in the country we wanted to be and at what point. The third challenge was to create a model of partnership with doctors, a new model for India. This last step required a lot of awareness building amongst doctors, financial investors, banks and private equity investors and working with equipment manufacturers. The other challenge was of course to set up the centres, keeping in mind the many regulatory issues and concerns of that particular region. We believe that we have now, to a great extent, mastered how to address these challenges and we feel more confident in executing future projects in a more timely manner.
What are some of the most surprising, innovative things that you have tried out? You began with IVF centre, MILAN. Could you tell us the story?
I would think our centralisation of services stands out as a good example of innovation in cancer care, i.e. our offerings in tele-physics, tele-radiology, tele-medicine and virtual tumour boards. Sometimes it is difficult to get highly-trained physicists in a centre such as Ranchi. But having 25 highly qualified physicists coordinating with the centre from Bengaluru allows us to replicate the same quality of care that we deliver in Bengaluru.
Also, because of the virtual tumour boards, patients do not have to travel long distances and can avail expert opinion at their doorstep. What is surprising, however, is that there is quite a lot of reluctance by local doctors and it requires counselling on our part to encourage the acceptance of such a model. What we need to explain is that cancer is a complex disease and requires a multi-disciplinary approach –people who are experts on sub-specialities of the disease must provide their opinions, and we must collect data on the disease as we go forward. Such an approach was lacking in the medical community and HCG has taken a leadership role in working with doctors, to encourage the building of this oncology knowledge base. I find it surprising that we have not yet focussed on taking such a multi-disciplinary approach to cancer care in India. We often find ourselves saying ‘there is no study so far for such a treatment’ so why is it that we cannot do our own study here in the country itself? We are capable of such innovation by taking a leadership role in onco-care.
With regard to our IVF centre, we have always been interested in creating doctor entrepreneurs especially in niche areas – IVF is one of these areas. We have a leader like Dr Kamini Rao, who has been instrumental in starting IVF offerings in the country, and when we had a discussion, it was very clear that there is opportunity and need for IVF in India. With our decision to take up a major stake, today we are happy to see the centres expand from three to eight in number, and I am confident that you will hear more about this growth in the future.
How has it been after the IPO?
In terms of business, we have continued our expansion as indicated prior to the IPO and new centres have been launched in oncology and fertility. Overall our presence across the country and large addressable markets continues to grow as we build on our leadership in these niche specialities. It has been very good overall, and every three months we report our earnings. I feel that we can now focus on the growth of the company. We have been meeting interesting people – investors, innovators, researchers, all of whom have contributed to the growing visibility of HCG. Globally, people are looking at us to see how to provide access and affordability while improving cancer care outcomes.
Tell us about your growth numbers so far especially after the IPO? What are your profit margins for 2016-17?
Our revenues have been growing at 20-22 per cent on a year – on – year basis and EBITDA has been growing at around 25 per cent. Our EBITDA margins at consolidated level are around 15 per cent and our PAT margins are at approximately 3 per cent for FY2017 – YTD Dec’16. We are not able to give guidance for the full year of FY17 at this amount.
How much do you invest in research y-o-y?
We do invest a significant amount of both money and time in R&D, but do not evaluate this investment as separate from our overall expenses. We have a large research team that is involved in the molecular diagnostics division, the clinical trials division and in data collection. We do get a lot of this research published in academic publications, creating a bio-repository that helps us move towards predictive analysis and next-generation sequencing.
What is your opinion about the use of algorithms to detect and treat cancers?
The use of data is becoming increasingly important in cancer care, and algorithms have become particularly helpful in this regard. For instance, if you have two patients with breast cancer, where one responds to treatment and the other does not, we look at the genetic and biological characteristics of both patients and based on the findings, we create a databank of recall that can be used to treat the next patient. Today, with the use of such predictive analytics, the focus is shifting from evidence based medicine to precision medicine and personalised care. Genomics will now play an important role as we go forward in cancer care.
What are your projects for 2017-18?
We have around seven to eight new projects which are expected to be launched in the coming 12-18 months across Mumbai, Kanpur, Jaipur, Kolkata and Kochi. We are also working actively on opportunities in Africa and could potentially have a project there soon.