Abstract
The increased awareness surrounding health is a significant factor contributing to the trend of health awareness. People are showing extra care with changing lifestylesleading to more proactive care toward their health. There was an immense need to fill this gap. The founders of Healthians, India’s most trusted diagnostics, sensed this need and converted that into a successful business model. This article analyses Healthians governance and brand strategy making it one of the largest players in the Indian market. The article begins by describing the initial journey of Healthians and its founder. The article also highlights the financial strategy of the company along with the funding details. The industry analysis had also been done along with an analysis of major players in the diagnostic industry, followed by a discussion on the expansion strategy of the company. The business model, corporate governance, and marketing strategy of the company have been discussed in detail, followed by the brand strategy, in order to derive useful learning from the journey of this company. Adequate discussion on the products of the company had been done, along with the mentioning opportunities waiting to be explored by the company. With the highest competitive and volatile market of the healthcare industry, this company ensures that the highest standards in corporate governance and business ethics are being followed in the company. The article concludes with some dilemmas being faced by the company which may decide its future course of action and the various alternatives available to the company.
Background
‘Prevention is better than Cure’ is an adage slowly gaining prominence among the Indian people as they have started focusing extensively on their health. As a result, the pharmaceutical and healthcare industry is growing, with diagnostic services playing in a significant role backing the growth of these two industries. Healthians is a healthcare start-up founded by Deepak Sahni in 2014 at Gurugram. HealthStart did an initial pre-seed round of funding, followed by further investment in 2015 by YouWeCan, an initiative of the cricket legend Yuvraj Singh, who is also the face of the brand 1 In a short span of 8 years, Healthians has become the leading health test-at-home service provider in India.
Despite being launched only in 2014, the company has grown leaps and bounds to reach where it is today, and today it is regarded as one of the biggest home testing and diagnostic company in India. The company, which started with one location, had managed to successfully grow to 140+ locations in just 8 years in one of the highly competitive diagnostic medical field of India. Healthians serves in more than 96 cities as of the end of the year 2021. So far, the company has raised a capital of $15.21 million in funding as of 2022 from national and international investors. The company employs over 487 persons as of 2021, and most of the employees are pathologists, who conduct tests on body tissues (Pharmabiz.com, 2022).
Beginnings of Healthians
The company was launched by Deepak Sahni and funded by YouWeCan, a nonprofit organisation by cricketer Yuvraj Singh. YouWeCan focused on four key areas: cancer awareness, screening, treatment support, and survivor empowerment. It has to be noted that Yuvraj Singh is also a cancer survivor. Healthians fall under the screening category of the initiative. The company raised almost $4 million in its first year from various investors such as Beenext, Digital Garage, Asuka asset management and YouWeCan. 1 The company operated standalone high-tech pathology labs with the help of its staff members. The company depended on both technology and human capital as a major source to run its business (Exhibit 9). The company uses the ‘Asset Light Model’, which requires very few assets as it operates via home testing for most of its customers (Exhibit 3b).
Healthians provides diagnoses of various body parts, including screening for allergies and infections. The company started with a paid-up capital of 1.06 crores (INR), with the first seed funding raised in August 2014 by HealthStart (Exhibit 5). The company had three directors and key management personnel, as seen in Exhibit 1. At the beginning of its journey, Healthians was just an aggregator of diagnostic labs. However, it evolved into a lab that provides aggregation to a logistics model in just a matter of a few months.
‘Many times, the collection guy would not reach as per schedule or charge money for collecting samples, which resulted in the loss of credibility for the brand’—Deepak Sahni, Founder of Healthians.
Ensuring the quality of the pathology results was the central focus, and Deepak Sahni observed that there are many concerns with the quality because of very less control over tests. The company overcame the difficulty by taking control of the tests with the help of pathologists instead of quality inspectors. The entire operation within the lab is under the control of Healthians, which improved the accuracy of the reports and the control over the brand credibility (Exhibit 9).
Industry Analysis
The diagnostics industry is valued at $ 9.5 billion as of 2021, with an expected CAGR of 11% every year (Chawla, 2021). Some major players in this industry are Dr Lal Pathlabs, Metropolis Healthcare, and Thyrocare Technologies. The major dominant force in the industry is the unbranded and unorganised labs that provide diagnostic services. For instance, the standalone diagnostic centers in the industry represent 48% of the total market share (Exhibit 6). The hospital-based diagnostic chains, on the other hand, represent 37% of the total market share. In most cases, diagnostic centers get referrals from doctors accounting for around 55% of their business. The walk-ins represent 35% of the business, and the corporate clients represent 10% of the total business. It can be regarded as one of the important markets for the diagnostic space, considering the ease of procurement (Bureau, 2022). The diagnostics industry is characterised by low barriers to entry as the capital requirements are quite low for offering a limited number of services. In addition, hospital-based labs are easy to maintain as the hospitals can ensure a steady flow of customers to their labs.
The diagnostic industry is seen as an attractive industry fueled by the growing healthcare sector of the country. India’s healthcare sector is one of the biggest and fastest-growing industries in the country. It is evident that during the COVID-19 pandemic, the Indian healthcare and pharma industry recorded an impressive growth rate. The awareness of keeping oneself healthy by taking preventive measures has increased in the past few years. The diagnostic industry generally relies heavily on the economies of scale and requires a large number of people to utilise their services. With enhanced health awareness among people in tier 2 and 3 places, the demand for diagnostic services is increasing. The national and regional diagnostic chains benefit from this growing trend and can find new markets in tier 2 and 3 places.
The strength of Pan-national diagnostic chains like Healthians includes accreditation of their testing processes from the highest standards bodies, extensive data availability, resource availability and customer trust. Organised and well-known brands are widely preferred by the rich and upper middle class, who become prone to diseases such as obesity, cardiovascular diseases and diabetes due to a sedentary lifestyle. The key market for the unorganised sector is direct referrals from doctors. It cannot be denied that the chains like Healthians face strong competition from unorganised standalone centers.
Some of the international competitors of Healthians are Advanced Cell Diagnostics (USA), MedGenome (USA), National Technology (Egypt) and Switch Health (Canada) [Exhibit 10]
Healthians Financial Strategy
The company’s revenue over the years has been on a steady rise. The company’s revenue during the year 2020 was 41.97 crores (Exhibit 3a). The revenue growth of the company dipped a bit in the year 2020 compared to the previous years due to the COVID-19 pandemic. The net profit of the company was –35.33 crores for the year 2020. The company’s profit has declined for the past few years, which could be an area of concern. However, considering the company had been on a growth cycle, it is understandable. The company aims to turn profitable by the end of the year 2022, according to the CEO. Meanwhile, the Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) is valued at –33.93 crores for the year 2020, and the net worth of the company is measured to be at 21.46 crores, which is a 180% increase from the previous year. The company has increased its current assets significantly, increasing its overall cash reserves by 2.2 times (Exhibit 4). The net margin of the company is recorded at –84%. In addition, the company was having debt in the years 2020 and 2021. The company made significant investments in its assets as its other noncurrent assets grew from 23.83 lakh to 946.46 lakh. The share capital of the company is valued at 74.80 lakh, which is quite higher than the 2019 valuation of 53.66 lakh. The reserves and surplus of the company have increased from a negative 3171 lakh to a positive 2006.5 lakhs. In addition, the company reduced the amount of current liability from 2999.7 lakh to 769 lakh and increased its cash reserves 2.17 times. The value of the company has increased from 1777 lakh to 4776 lakh in 2020, which is a 2.68 times increase (Exhibit 3b).
Funding Strategy
On 1 August, 2014, in the pre-seed round, Healthians raised an investment of $30K from HealthStart. This accelerator program encourages healthcare entrepreneurship in India and provides seed funding and angel investments to Healthians. The company raised another $180K from Angel Round on 23 June 2015. The company further raised $3M from BEENEXT, a venture capital company that invests in start-ups across India, Southeast Asia, Japan and the USA. The company showed strong growth in 2016 as its revenue increased 18 times, which resulted in a further successful funding round by way of the venture funding from Asuka Asset Management, a Japan-based investment company. In 2019, the company raised 4.31 crores from Trifecta Capital Advisors as the first debt in its capital structure. Trifecta Capital is an alternate investment advisory company that operates in India. One of the biggest investments of Healthians came from DG Lab and DG Ventures, which invested over $12 million in the year 2019 in Series B funding (Exhibit 5). A total of six different investors invested in this round of funding, with DG lab being the main investor. Healthians has raised $15.2 million so far and is expected to raise another 60 million in 2022 with its Series C funding round.
The Board of Healthians and Its Corporate Governance Strategy
The Board of Healthians comprises three directors—Deepak Sahni (Managing Director and Promotor), Renu Sahni (Director and Promotor) and Nishant Singhal (Independent Director) (Exhibit 11a). Deepak Sahni is the Managing Director, Nishant Singhal is Nominee Director and Renu Sahni is the Director. Board submits the annual report of the company on March 31st of every year along with the report of the Board of Directors and the auditor’s report. In FY 2020–2021, there have been 17 board meetings to discuss and resolve policy and governance matters as a part of the agenda. The maximum time between any two board meetings was not more than 120 days. The board generally meets at least once a month (Exhibit 11b).
As per the Directors report for the year ended 31 March 2021 the board had resolved that the company does not have any associate companies, joint ventures or subsidiaries. No substantial changes and commitments have occurred from the year ended 31 March 2021 till the date of the Director’s report, which can affect the financial standing of the company directly or indirectly. Also, there was no alteration in the nature of business being conducted by the company during the year ended 31 March 2021. Directors have not proposed any dividend, and no amount was transferred to reserves. During the year ended 31 March 2021, no Director had resigned from the company, and no new Director has been appointed by the company. The board also resolved that there were no significant or material orders given by any court, regulator, or tribunal which impacted the going concern of the company or its future operations.
As far as the requirement of the declaration given by independent Directors is concerned, the provisions of section 149(6) of the Companies Act 2013 regarding the appointment of independent Directors do not apply to the company. Hence, the requirement of getting the declaration from the independent Directors does not apply to the company. Similar is the case with a policy on the appointment and remuneration of Directors. The provisions of section 178(1) of the Companies Act 2013 regarding the constitution of the nomination and remuneration committee do not apply to the company.
Regarding the financial statements of the company, the board maintains adequacy of internal financial controls to ensure orderly, smooth and efficient conduct of business. These include strict adherence to the policies laid down by the company, safeguarding its assets, preventing and detecting any case of error or fraud, correctness and completeness of accounting records and books, and timely availability of financial information required by all the stakeholders of the company. In order to align with business needs, these controls are reviewed periodically for any changes or modifications by the board to maintain their effectiveness. The board also ensures that as per the threshold mentioned under section 197(12) of the Companies Act 2013 along with rule 5(2) of the companies (appointment and remuneration of managerial personnel) rule 2014, no employee was getting excess remuneration. The board has taken adequate measures to mitigate the risks foreseen by the company, as per provisions of risk management under section 134(3) (N) of the Companies Act 2013.
Corporate Social Responsibility (CSR) at Healthians
Although the Company is not legally bound to constitute a CSR committee or a CSR policy as it does not fall within the purview of section 135(1) of the Companies Act 2013, Healthians voluntarily takes various CSR initiatives from time to time for the greater good of the society at large. For example, the company has aligned itself with the Ayushman Bharat Yojana of the government of India, which aims to provide accessible and affordable healthcare for all citizens of the country. Healthians has adjusted its pricing in many cases to meet the overall objectives of this scheme of the government of India. For example, in tier two and three places, Healthians aims to keep prices under control so that its services can be afforded by the masses. As highlighted earlier, Healthians has built an asset-light business model with minimum Capital Expendenditure (CAPEX) investment. The complete control over the management of labs and having its network of phlebotomists further helps eliminate the commission of the middlemen. Healthians target to keep its prices around 40% lower than the market rates so that the masses can access to quality diagnostic services. These rates are quite close to the Central Government Health Scheme (CGHS) rates of the government.
Healthians aims to be a socially responsible company in the country. From time to time, Healthians keep arranging free Health check-up camps for the lower strata of society, who are not able to afford basic health services. The objective is to provide a minimum level of healthcare services to people outside the purview of the basic healthcare system. Healthians also support other organisations spreading awareness about various diseases and ways to control them. Healthians realise that healthcare is a moral industry and profit is not the only objective here. Hence, Healthians always remain open to supporting any organisation working toward the objective of providing affordable healthcare services for the people.
Expansion Strategy of Healthians
The expansion strategy of Healthians initially focused only on tier 1 places with a specific focus on the metro cities such as Delhi, Gurgaon, Mumbai, Noida, and Pune. After the initial success in the northern market, the company started venturing into southern parts of India, It also focused on Bengaluru, Chennai, and Hyderabad for expansion4 During the initial days, the company only relied on SMS marketing as the source for its advertising. The cost of acquiring the consumers was quite high during the time as the company depended on unsegmented contact data, which increased the difficulty in acquiring and maintaining consumers. However, the company started relying more and more on the social media platforms such as Google AdWords and Facebook marketing which provided better leads at a much lesser cost. The company designed a detailed targeting plan for the consumers (Bureau, 2022). Marketing through online channels provided the company with more options. A company that operates with its branches always has the issue of consistency with its testing procedure. Healthians overcame the issue by focusing on making training videos that work as the standard for the business. The employee responsibilities and the testing process are clearly explained in the training videos. Healthians use the training videos as the ‘standardised training process’. By streamlining every process with its training videos, the company can ensure that they maintain the required quality to meet the quality standards for testing.
Corporate Governance Measures at Healthians
The Indian company law, updated in 2013, states that directors owe obligations not just toward the company and shareholders, but also toward the workers, the community, climate, and the environment. Healthians board makes sure to adhere to all the principles of corporate governance within its internal functioning. It has a robust whistleblower policy in place where any member of the company is free to report to the top management about any act of wrongdoing being committed by any other member. Healthians has a zero-tolerance policy toward certain issues, which it considers crucial for its overall functioning. Employees are free to walk into the office of the top management if they wish to raise any concern about anything they feel is not ethical or not in line with healthy business practices. The board of Healthians fully complies with provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. Accordingly, an internal complaint committee is in place at Healthians, and a mechanism has been set to report any such matter directly to the board. All female employees are encouraged to freely report any case of sexual harassment faced by them by any member of the company and strict action is taken against that member, including immediate termination from the services of the company. Such policies and actions have helped increase employee involvement and engagement with the company.
Healthians believe in equal employment opportunities in their company. The basic objective is to maintain diversity in the manpower of the company. Women candidates are encouraged to apply for various designations of the company. Specially abled candidates are also encouraged to apply for the same. No distinction or bias is made with any employee based on his gender, language, religion or faith. Healthians believe in extending fair treatment to all its employees. A fair compensation policy is in place in which no bias is made against any employee. Healthcare industry calls for trained and expert manpower. In order to attract well-qualified candidates, businesses need to provide competitive pay packages to them. Nevertheless, any executive remuneration must withstand the scrutiny of the various stakeholders, including the shareholders of the company. A policy on the compensation of important personnel is required to be drafted by the nomination and remuneration committee formed by the board of the company. In addition, the yearly salary paid to top executives of the company has to be made public. The board of Healthians works seriously in this domain to keep their talent intact with them and has a very low employee attrition rate.
Healthians try their best to include sustainability in all business practices. Green practices are followed all over the company, from top management to the labs in the field. Healthians is trying to reduce the usage of plastics in its operations and include biodegradable materials in its labs. Simple practices like encouraging carpooling to reduce carbon emissions are a part of day-to-day functioning at Healthians. Some other practices at Healthians to ensure sustainability is encouraging solar power, running the air-conditioning plants at optimum temperatures, conserving water, and safe disposal of waste.
Adequate disclosers and reporting is a regular practice at Healthians. The company believes in sharing complete information with all its stakeholders—employees, investors, suppliers, government and the society. All the necessary facts and figures are duly reported to all the concerned stakeholders at regular intervals so they are well aware of the ongoing status of the company. It also helps in building trust with the stakeholders.
Business and Marketing Strategy
The company strongly relies on online marketing as the main marketing mode for its services. When it started, online penetration was also an area of concern for the company as the penetration rate remained at less than 1%. But Sahni was confident about their growth as he expected the company’s online penetration to rise further (ET Government, 2022). The core business strategy of Healthians revolves around convenience over anything else. Healthians aims to streamline the entire process for the customers to ensure they are comfortable. The company does not work based on the commission model, which requires a tie-up with the local doctors and hospitals. Most of the unorganised labs work with this model. The price of the diagnostic services of Healthians ranges from INR 249 to INR 3,299 (Exhibit 8). The company also provides risk assessment services for multiple diseases including cancer.
Healthians made strides in the business when it entered the market because its business model is different from the traditional B2B model being followed by many diagnostic chains. Healthians use the B2C model, which directly connects them to the consumers. The B2B labs receive a regular inflow of customers in the form of references. However, B2C businesses such as Healthians had to rely on walk-ins for revenue. In order to bring customers, the company has to rely on its campaign that promotes proactive testing instead of reactive testing based on the doctor’s recommendation. Social media marketing and other online platform marketing were used by the company to gain a good customer base. The business of diagnostics is a long-term business with clients needing regular check-ups. Therefore, with its service quality, the company aims to cement a long-term relationship with its customers.
The company started using localisation as one of the key strategies to appeal to its customers, which decreased the consumer acquisition cost by 25% and cost per lead by 60%. The company also uses local languages to suit the needs of local consumers. Healthians have a clear view of their target market. The company targets health-conscious millennials (who are born between 1981 and 1996). The increasing trend of millennials being health conscious has been a key driving force for the company. The tier 1 places have been the sole focus for the company during its initial years. During the COVID-19 pandemic, Healthians worked with some state governments to the patients. The company used its workforce to collect samples and data during the pandemic with the governments of Haryana and Karnataka. The company had strong brand exposure in the north due to celebrity endorsements and strong marketing. This is especially true for tier 1 places where most revenues come from. However, the company’s foothold in South India is not strong, with a limited number of branches, mostly in metro cities such as Bengaluru, Hyderabad, and Chennai. This can be regarded as one area of concern that the company must focus on.
Healthians business model is unique compared to the other PAN India diagnostic labs. Sahni describes that the healthcare industry of India has always been more reactive than proactive, with the doctor’s recommendation of the tests being the dominant factor in this industry (Bajwa & Mehdiratta, 2020).
The doctor recommendation doesn’t affect the business model because the doctor recommended tests are also included in the Healthians product portfolio’.—Deepak Sahni.
Healthians enjoy the advantage of economies of scale. The company can provide tests at a cheaper rate compared to other unorganised labs because of it. The online branding strategy of Healthians usually involves promoting social issues related to their business. For instance, an initiative to protect women’s health through the change.org campaign generated significantly impacted the social media platform (Exhibit 7a). The company also uses other initiatives, such as promoted tweets and hashtags (Exhibit 7b). Instagram and YouTube are also used. In terms of offline branding, the company widely uses Flex boards and television commercials to promote its brand. So far, Healthians has done over 800+ branding campaigns to raise awareness about their brands (Exhibits 7c and 7d)
Products and Packages
The product portfolio design of Healthians is extensive and helps the customers take precautionary measures regarding the specific set of diseases that could face. The lab testing is done for a limited price compared to the doctor-recommended tests which could cost a lot and only include one or two tests. Using their services gives the patient and the doctor an extensive health outlook. For instance, a basic full-body test provided by Healthians covers over 115 tests. The customers can add further tests to the existing packages at an extra charge. The most popular package category for the company is the full-body health check-up which costs INR 999, and the preventive package costs INR 599. The company also introduced product diversification in its list of services by selling protein and vitamin supplements on its websites. These products are sold under the brand Herbved+, mainly consisting of vitamins and supplements dealing with lifestyle diseases. The price of these products ranges from INR 550 to INR 1,200.
Road Ahead—Challenges and Opportunities
The company’s biggest opportunity lies in the increasing health consciousness among millennials. The Indian millennials in tier 1 places are well-educated, making marketing their services much more feasible. The improved awareness is caused by education and the improved economic condition of the Indian Citizens (Rudrappa et al., 2019). Technological advancement is also touted as one of the key factors driving the growth of the company. Tools based on artificial intelligence are being used by Healthians via online portals, offering greater flexibility and convenience (Huang et al., 2020). The company has developed a strong training system which helps it to maintain its expected standards in its testing procedures in different branches. The ease of entry and low barriers to entry and exit has encouraged many small ventures to enter the market of diagnostics. This leaves the diagnostic industry without any substantial regulatory oversight regarding the best practices and standardised testing procedures (Gomez et al., 2020). However, once the industry becomes more regulated, it will improve the quality of testing and curb many labs that fail to provide quality standardised testing.
As the company expands into new markets (Joy, 2022), the need for talent and human capital will eventually increase for further expansion. This may be a challenge for the company. The second challenge of the company lies in identifying the appropriate health technology assessment mechanisms and translating these criteria into a design that supports innovation. If the company enters tier 2 and 3 places, it may also have to change its marketing approach, as there is a vast difference in the online marketing reach in these areas.
So far, the company has raised over $15 million in funding as of 2021 from national and international investors. They are expected to raise a further $50 million for their venture. The company can face a challenge in areas where they should be spending these newly raised funds. Regarding expansion strategy, Healthians has two alternatives. The first option is to focus on starting new branches in tier 1 places where they already have a strong presence or expand into tier 2 places that can open up newer markets. So Healthians have the opportunity to enter into the untapped market with less awareness about their brand, or they have the option to keep working in the current market space, where they have brand awareness about their product and services by further expanding their business in these major tier 1 places.
The other question that may arise is how their decisions would affect the profitability of their company. The investors might be worried about the lack of profitability in the company, as the company has not provided a positive balance even after many years since its inception (Exhibit 3c). The company is also expected to raise a further $50 million in 2022. Breaking even into profitability will be a key factor Healthians will face going further. Healthians also wants to expand its business in overseas markets. It has to be explored what their expansion plans would be considering that regulatory affairs are stricter abroad than in home country. Also, to grow should Healthians go for merger and acquisition, or is standalone expansion better alternative? These are some of the areas which Healthians have to address.
Annexures
Source: Registrar of Companies, Ministry of Corporate Affairs, India.
Financial Statements (2015–2020).
Year wise Comparison of Profit and Loss (2015–2020).
Ratio Analysis (2015–2020).
Funding Raised by Healthians.
Competitors.
Board Composition as on March 31, 2021.
Board Meetings in FY 2020–2021.
Top Shareholders in the Company as on 31 March 2021.
Equity Shareholding Pattern.
