Dr. GSK Velu, a first generation serial entrepreneur with more than 22 years work experience in the heathcare sector is a rare example of one who has been able to raise risk capital for each of his ventures. Velu began his entrepreneurial efforts when he founded Trivitron Healthcare in 1997, a medical devices manufacturer which specialises in in-vitro OEM medical devices & implantables, and managed to rope in HSBC & ePlanet Capital as private equity partners to raise $11million to build the enterprise. His other new ventures -- Metropolis, a diagnostics chain and Medfort- a single speciality eyecare hospital chain -- also caught PE interest early on. While Warburg Pincus put $85 million in Metropolis in 2010, homegrown PE investor TVS Capital infused as much as $13 million (Rs.90 crore) in Medfort in 2010. Dr Velu has also teamed up with Dr. Pratap Reddy's Apollo Hospitals in a dental care joint venture called Alliance Medicorp, in which he holds a 30 per cent stake. In a video interaction with VC Circle, Dr.Velu shares the key focus areas for Trivitron and expansion plans and what spaces within the healthcare value chain will see investor interest going forward. Excerpts:
What are the areas that will capture investor interest in healthcare in the coming years?
One thing that healthcare has shown is that it is recession proof. If you see the pharma stocks, they are all doing well and I am sure looking forward healthcare stocks and medtech stocks, which are quickly growing, will do well. If you see the PEs investing worldwide, you'd see that one third of PE Funding is in the medtech space. Unfortunately in India, there is no credible scale for PE investors to look at. But, I do see investment picking up in medtech. In healthcare delivery services, not only super speciality services, but primary and single speciality services are also areas where the investor interest will pick up.
What are your expansion plans going forward? Any acquisitions on the cards?
Trivitron wants to be a global technology company with an Indian heart. India being a diverse country we have to be present in the premium businesses & value products. So the value products are where we are looking at, including our own innovation and M &A. So even if we look at Europe & US to acquire, our ultimate aim is to bring the medical devices to India, tweak it and make it affordable to a large section of the population. Our focus in the last five years has been South East Asia, Middle East and Africa. So now, we are looking at synergies with people in US, Europe and Africa to build up our global presence.
You recently raised capital from Warburg Pincus and recent news reports suggest that the investment is not necessarily coming along well. What are the thoughts on providing investors with a liquidity option?
I am sure Warburg is very happy with their investment in Metropolis, because Metropolis is doing very well and whatever the promoters had said that will be achieved, is being achieved. Today, no one wants to be in the public markets, not Metropolis but also Trivitron and the other companies, given the current market situation. But at the appropriate time I am sure Metropolis has the scale and bandwidth to go public, but I can tell you now that no such decision has been taken, and I think you should ask Warbug Pincus whether they are happy. I am sure they will say they are extraordinarily happy with Metropolis.
You've been in the medical devices space for a long time now, but how is the market appreciating medical devices segment? Is there an appetite & how are you competing with the Chinese manufacturers who are flooding the market with low cost products?
When we talk about medical equipment, by the very definition, it’s a very complicated scenario because in medical equipment there is medical technology, medical consumerable devices, in-vitro diagnostic devices. It is not a basic science, it is an applied science. So, for you to run a comprehensible medical devices company, your input industries are electrical, mechanical, biotech, pharma & IT industry. Being an Indian company, we have a very vibrant pharma, IT & biotech industry. We should align our product orientation and manufacturing initiatives in line with these three industries, which most probably will be in the areas of in-vitro, implantable devices & some of the biotech initiatives and that's what Trivitron will focus on in terms of scale and manufacturing.
Is there no room for consolidation in India? Are attractive targets not available here?
None of the healthcare enterprises are looking outside as a focus market. All major healthcare companies which grew to a sizeable scale had a big chunk coming from their domestic markets. Many companies from the US & Europe had 80 per cent of their revenues coming from the domestic market, but they had a global dream. When we say we have a global dream by being in advanced & other markets, it is because, we want to build credibility, because when we become globally competitive, we will have to have a strong local credibility. So it’s not like a majority of our revenues will come from outside. We are still very much focusing on India, because there is a large market here. Credibility is one thing, but another reason is for profits. There are higher profit margins in these countries, even though volumes may be far lesser. In Africa today, access is the big problem because there is no trained man power & no hospitality services. Many medical devices coming from US, Europe & Japan, they cannot afford nor maintain. In the next 20 years, Africa will be a very big market. If anyone has a 10-year forward dream, then they need to have a seed presence now, as you can do it with very low risk and without investing heavy capital.
What are the other geographies that look attractive to you?
Central and East Africa are the places most promising, countries like Kenya, Tanzania & Nigeria are showing promise. Also Egypt in particular is exciting.