Om Prakash Manchanda studied veterinary science and animal husbandry in college. That’s what everyone seemed to be doing in those days, he says, recalling a period three decades ago. But mid-way through his postgraduate in veterinary medicine, he changed tack and went for an MBA degree instead. That decision turned his life around and has now made him a multi-millionaire.
Manchanda is the chief executive of Dr Lal PathLabs Ltd, one of India’s largest diagnostics chains. He joined the company in 2005 as COO and became CEO in 2008. During the past decade, he has led the 67-year-old company through a period of rapid expansion. And in December 2015, he led the company to a blockbuster initial public offering that put the entire diagnostics sector under the spotlight.
Dr Lal PathLabs was founded in 1949 and got its first private equity funding in June 2005 from WestBridge Capital. It was then that the owners of the family-run company brought Manchanda to make the company’s management professional.
At the time, Dr Lal PathLabs had only 10 laboratories and revenue of around Rs 45 crore. Now, the company has a National Reference Laboratory in New Delhi and 172 clinical labs. It also has 1,559 patient service centres, 4,000 employees and nearly 5,000 pickup points. Its total revenue in the year through March 2016 was Rs 791.30 crore.
Even his rivals admire his success. One such competitor is A Velumani, CEO and founder of diagnostics firm Thyrocare Technologies, which followed Dr Lal PathLabs to list on the bourses in May. Velumani says Dr Lal PathLabs covered 90% of its journey in the past 10 years. “And I have reason to believe that the arrival of Manchanda and private equity players made this possible,” he says.
Manchanda had his doubts, however, when he was made the offer to join Dr Lal PathLabs. Even though he had worked for nearly 15 years with big companies such as consumer goods giant Hindustan Unilever, drugmaker Ranbaxy and seeds firm Monsanto, he knew the new role at Dr Lal PathLabs would be difficult.
“It was quite challenging initially. Other than the business, what we had to build was a strong brand. We invested a lot on brand building,” says Manchanda.
The IIM-Ahmedabad graduate says that, before joining Dr Lal PathLabs, he reflected a lot on his experience from his days at Unilever, which was his first job and where he found good mentors in D Shivakumar, Kanwaljit Singh and Sanjay Khosla. Shivakumar is now head of PepsiCo India, Singh co-founded Helion Venture before moving out to start Fireside Ventures while Khosla is a senior fellow at Kellogg School of Management, Northwestern University, USA, and a senior adviser at Boston Consulting Group.
“I have known Om (Manchanda) for 20 years, first as a colleague at Unilever and then as a successful executive and business builder at Dr Lal PathLabs,” says Singh. “He's a wonderful person and a natural leader.”
Manchanda says he got strong support from Dr Lal PathLabs’ founders and PE firms alike. “Once I started showing results, I was settled and then I was on my own,” he says.
After WestBridge, the New Delhi-based company brought another PE investor—TA Associates—on board in 2010. TA Associates bought the stake from Sequoia Capital India in a secondary deal that valued the company around Rs 1,000 crore. Sequoia had had acquired the stake as a result of a merger with WestBridge. The two firms subsequently separated.
Thyrocare's Velumani highlights the aggressiveness that PE firms bring into a company and how they drive a CEO to achieve targets. “Even in Thyrocare's case, PEs wanted me to do something aggressive and something more serious. I went a bit slow... In Dr Lal PathLabs’ case, a lot of credit goes to Manchanda,” says Velumani. “Whether he alone has been deciding or just implementing the decisions of the board, he has done a powerful job either way.”
Manchada says he worked on a five-year plan to implement the company’s strategies and was on point to float the company's IPO last year.
The listings of Dr Lal PathLabs and Thyrocare have brought the diagnostics sector to the limelight. According to a report by ratings and research firm CRISIL, the industry is likely to grow at an average annual pace of 16-17% to Rs 60,100 crore by 2017-18 from Rs 37,700 crore in 2014-15.
The two companies trumped the country's largest diagnostics chain, SRL Ltd, a unit of Fortis Hospital, in the move. SRL is also likely to list soon, Fortis said recently.
Dr Lal PathLabs commands a market value of Rs 9,671 crore, compared with Rs 6,811 crore on its listing day.
Manchanda owned a 1.79% stake, or 1.13 million shares, before the IPO. He has since then shed his stake to 1.07% as on 30 June 2016, according to the company's annual report. His stake is worth around Rs 104 crore ($15.5 million) at Tuesday’s closing share price of Rs 1,168.
He also holds 585,560 fully vested stock options granted to him in the past. These stock options are worth Rs 68 crore ($10.1 million). Besides, he drew a remuneration of Rs 29.91 crore (including Rs 26.20 crore on exercise of stock options) for the financial year 2015-16.
What are his plans now?
Manchanda says he hasn't thought about starting something on his own. Instead, the focus is on Dr Lal PathLabs.
The company wants to enter more regions in India, its main focus. “We have an international presence and we want to go to other parts of the world as well,” he says.
“We have to make sure we take Dr Lal PathLabs forward. We have a long way to go,” he adds.
He certainly has a long way to go. And his graduation in veterinary sciences will finally come in handy. How? Dr Lal PathLabs has just launched diagnostics services for pets, farm animals and even wild animals.
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