Dr Lal PathLabs: Different aspects of a growth story

Just a year ago, Dr Lal PathLabs went public with its IPO and registered huge growth within days. The pathological lab chain has been growing at a CAGR of 20 per cent, expanding to newer markets each day. “It’s important that you are on a treadmill where the company grows continuously whether it is by funding or by IPOs. At the end of the day, it’s all about making money,” said OP Manchanda, CEO, Dr Lal PathLabs, speaking at Franchise India 2016.

Wellness India spoke to Manchanda on different aspects of his business as well as the industry. Here are excerpts from the interaction:

Growing with franchising and technology

Why our brand has become so popular is because of technology. It’s all thanks to technology that today I can track my whole business sitting at one place. Franchising builds a momentum for your brand. As the base becomes bigger, growth becomes higher. And, this growth makes you competitive on pricing, and as a result, your turnover goes up. And, if both partners are happy, the journey will be great.

Raising funds despite franchising

It is essential to tell investors that having too many stores/branches of your own has many operational barriers and hence, franchising is essential. But funding must be a conscious decision. If your business model doesn’t require funding, don’t go for it. Raising funds is not something fashionable

IPO

IPO is just a new life that has begun for us. Firstly, it’s getting us money, secondly it provides liquidity to our stakeholders, third is the softer issues like it becomes easy to attract talent and lastly, my brand has become well known. My mailbox is now full of people wanting to be partners or franchisees.

Challenges in the industry

The first challenge is that it’s highly fragmented, so it’s highly competitive. There are close to hundred thousand labs, so we have to compete with each other. Number two is that it’s highly relationship-ruled business. The 4 Ps of marketing are okay, but it all boils down to the relationship between the patient and the doctor. It’s a patient’s business. So you need to be patient in our business. The whole point is that this entire enterprise is not built overnight. So many years of hard work have gone into what we are today. So many years of patience have gone into it to taste success.

Evolution of the industry in the past 11 years

First of all, there is lot of branding work that is going on. People are trying to build chains of labs rather than stand-alone labs. Number two, as those chains of labs are growing, it’s putting a lot of pressure on stand-alone labs. I find that there is a partnership that is emerging between those single labs vs the chain of labs. Then, a lot of newer tests are coming in. Initially, there were routine tests, and now there are some high-end tests. High-end tests are actually not done by all the labs. So they have to depend on the bigger labs. So again that is helping the industry to consolidate. There’s still a long way to go because all these big players put together constitute for about 10 to 15 per cent of the organised, the rest are still unorganised. But the trend is from unorganised to organised.

Evolution of Dr Lal PathLabs

We started from Delhi, so we started expanding into particular geographies. Our growth model is highly organic in nature which has helped us to build our single brand. While inorganic is always an option because if you really want to get scales, you need to acquire a lot of small practices. But so far, we’ve actually built it more organically and that has given us a good financial track record and probably we’ll follow both the approaches – organic as well as inorganic.

The importance of digital marketing

I think so because it’s not about industry, but about consumer behaviuor. The way we consume things today, it’s all digital. Whatever I want to know, the first thing I do is I go to my mobile and look for it. So I don’t think it’s an industry specific phenomenon, some industries are catching up faster than the other one, healthcare also will be delivered through the digital route and I strongly believe it’s good news for India because accessibility of healthcare has always been an issue. And I think digital does provide that solution to make healthcare accessible.