Thyrocare Disrupting The Indian Diagnostic Industry

For the exclusive use of B. Sukoco, 2020.
W20389
THYROCARE: DISRUPTING THE INDIAN MEDICAL DIAGNOSTIC

INDUSTRY1
Suresh Srinivasan, Swati Agarwal, and Sameera Sepuri wrote this case solely to provide material for class discussion. The authors
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Copyright © 2020, Ivey School of Business Foundation Version: 2020-05-06
This is not another rags to riches story, but a story of focus, discipline, honesty, frugality
and disruption; which of course doesn’t end here. I have more to learn, disrupt and achieve
in the years to come!
Arokiaswamy Velumani, founder, chairman, and chief executive officer, Thyrocare Technologies Limited
On a rainy July afternoon in 2017, Arokiaswamy Velumani, founder and chief executive officer (CEO) of
Thyrocare Technologies, was on one of his routine walks through the state-of-the-art centralized processing
laboratory (CPL) that he commissioned in Navi Mumbai. He realized that it had been an exceptional journey
of 21 years at Thyrocare, which began in 1996 with a unique philosophy and mindset of taking the path
less trodden and striving for excellence, unparalleled in the history of India’s diagnostic industry.
He had just reported Thyrocare’s financial results for the fiscal year ending March 31, 2017. Despite a
marked slowdown in the macroeconomy2, Thyrocare posted exceptional numbers; its revenues increased
by 28 per cent. Its earnings before interest, tax, depreciation, and amortization (EBITDA) and profit after
tax (PAT) margins were the highest in the industry, at 40 per cent and 22 per cent, respectively,3 leaving
industry peers far behind. Velumani, who held a doctor of philosophy degree in thyroid biochemistry, was
humbled and felt the faith reposed in Thyrocare by customers, partners, and investors alike. Since its
inception in 1996, Thyrocare had disrupted the “fragmented” Indian diagnostic industry and its competitors
through its unique operating model. Its CPL, spanning 200,000 square feet (19,000 square metres), had set
a precedent in the industry and stood out as a benchmark of excellence. The CPL was India’s first and the
world’s longest track automation system, spanning 300 feet (93.5 metres),4 through which samples moved
seamlessly for processing. Thyrocare had enjoyed an enviable competitive advantage for over two decades
that its industry peers couldn’t match.
As he walked through the CPL, Velumani’s thoughts drifted back to the questions some analysts had raised
earlier that day. Could Thyrocare’s unique operating model remain inimitable in the future? Could
Thyrocare preserve its competitive advantage?
This document is authorized for use only by Badri Munir Sukoco in 2020.
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THE INDIAN MEDICAL DIAGNOSTIC INDUSTRY
The Indian health care industry was highly underpenetrated during the mid-1990s. Total annual health care
spending for fiscal year 1995–96 was ₹788 billion.5 Although the population in 1995 was 960 million
people,6 the country had just 15,097 hospitals, 870,161 hospital beds, 28,225 dispensaries, 21,802 primary
health care centres, and 160 medical colleges. The total number of doctors was only 474,270, and nurses
numbered only 512,595.7 During the mid-1990s, medical diagnostic services were largely limited to sick
patients, with only minimal awareness of wellness and preventive care. The demand for diagnostic services
was low, and competition was restricted to very few players. Laboratories attached to the hospitals had their
captive business, whereas standalone laboratories received routine referrals from doctors, who directed their
patients to their preferred laboratory. Most hospitals built a rapport with physicians located in the
surrounding community and encouraged such physicians to send testing samples to the hospital’s
laboratory. The entry barriers were quite high at the time due to the lack of skilled technicians, equipment,
and financing needed to manage the laboratories, despite the small size of the industry. Patient awareness
of the diagnostic intricacies was minimal, as was awareness with respect to quality, accuracy, and timely
availability of reports. Meanwhile, the hospitals and laboratories priced their services generously, leaving
patients to pay high costs. Nonetheless, patients were ready and willing to pay the set prices.8
MEDICAL DIAGNOSTIC INDUSTRY: THE TWO DECADES BEFORE 2017
The last two decades leading up to 2017 had seen the emergence of stand-alone local laboratories,
substantially increasing competitive rivalry. Despite new entrants, the diagnostic industry had remained
highly fragmented; there were more than 100,000 diagnostic centres in the country. 9 The early 2000s also
saw the emergence of private, non-hospital-based diagnostic chains. Diagnostic chains were categorized as
either regional or pan-India, and private diagnostic chains were predominantly regional and highly
localized. Only a few players had managed to expand across the country to gain a pan-India presence.10
Over those two decades, India had been one of the fastest growing economies, with average gross domestic
product (GDP) growth of 7 per cent.11 However, health care spending in India was still lagging behind
developed and developing nations.12 With the growth in the country’s GDP and health care spending, the
diagnostic industry steadily evolved. In 2017, 85 per cent of this fragmented market was unorganized and
comprising health care centres, nursing homes, and regional players that catered to around 37 per cent of
the industry’s needs. Stand-alone laboratories and small diagnostic centres served almost 48 per cent of the
industry.13 The organized sector consisted of a few large pan-India diagnostic chains that catered to
approximately 8 per cent of the overall market, and pan-India hospitals with their captive diagnostic centres
catered to approximately 7 per cent of the overall market (see Exhibit 1). The size of the Indian diagnostics
industry was pegged at ₹377,000 million.14 The barriers to entry in the segment of pan-India diagnostic
chains were accreditation requirements, accessibility to doctors and partners, and the need for large amounts
of financing. However, these branded diagnostic chains did enjoy greater pricing power.15
The patients did not have much choice when it came to the pricing set by each diagnostic laboratory.
Generally, the industry did not operate to scale, testing laboratories distributed across the country had
subscale operations, and the testing process was done manually with substantial human intervention.
Regulatory oversight was minimal. Suppliers were primarily vendors providing testing equipment and
consumables, generally known as reagents. These reagents wielded power, meaning that the cost of supplies
varied widely with the volume of procurement. Staff were generally not well trained in operations, safety,
and hygiene. Nonetheless, despite such inefficiencies, the industry enjoyed healthy margins. Imaging
diagnostics contributed 44 per cent to the Indian diagnostic industry, and the remaining 56 per cent was
from pathology diagnostics16 (see Exhibit 2). Large diagnostic chains operated in the pathology testing
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space, and only a small portion of their revenue came from imaging diagnostics, including X-ray,
ultrasound, and computed tomography (CT) scans, along with the higher end nuclear imaging of positron
emission tomography (PET/CT). But nuclear imaging diagnostics was capital intensive, and pathology
laboratories were generally not present in this segment.17
Pathology diagnostics dealt with testing bodily fluids and tissues, and the broad category of pathology tests
included biochemistry, immunology, hematology, and other testing tools like microbiology, coagulation,
and urinalysis.18 Biochemistry tests primarily formed the bulk of Indian pathology diagnostics, accounting
for approximately 39 per cent of all pathology diagnostics (see Exhibit 3); sugar and lipid profile testing
accounted for a third of all biochemistry tests.19 Biochemistry dealt with changes in the chemical
composition of body fluids in response to a particular disease or disorder, as compared to results from a
healthy person. Biochemistry was unique among the categories of pathology testing in the sense that blood
samples remained stable over ranges of temperature and time, rendering this testing conducive for long-
distance sample transportation. Biochemistry testing processes also required the least human intervention
and could thus be highly automated, whereas other pathology tests required extensive human involvement.
For example, microbiology tests samples needed to be incubated and attended to by humans. As a result,
samples remained in the laboratories for a longer time.
The diagnostic market was segmented into preventive care and sick care, with 9 per cent of the overall
market devoted to preventive care (also known as the wellness segment) and the balance devoted to sick
care.20 Although the preventive care segment was smaller, it had been growing at a much faster rate, fuelled
by the growing middle class, increasing medical awareness, increasing per capita income, and increased
insurance penetration.21 Similarly, the diagnostic industry was also broadly divided into testing related to
either diseases or disorders. Diseases were caused by external pathogens like viruses and bacteria (e.g.,
malaria, tuberculosis, or the Human Immunodeficiency Virus, commonly known as HIV) and were
considered short-term (or acute) issues, while disorders were functional abnormalities and included
conditions like hypertension, diabetes, abnormal thyroid activity, infertility, and more, which were
considered long-term (or chronic) issues. Patients with diseases had medical diagnostic tests performed as
and when there was an onset of disease. However, patients with disorders had to periodically undergo tests
in a regular fashion, such as thyroid and diabetes patients who underwent diagnostic tests every three
months.22 The latter was a constant stream of income for the diagnostic laboratories.
Accreditation was a voluntary process that few diagnostic labs completed.23 The accreditation process itself
was expensive, given the compliance costs that it entailed. Therefore, many small laboratories avoided
accreditation, but most large diagnostic chains were accredited by national and international bodies such as
the National Accreditation Board for Testing and Calibration Laboratories (NABL) and the College of
American Pathologists. However, according to details on the NABL website, less than 1 per cent of the
existing medical laboratories had been accredited.24
The diagnostic industry value chain (see Exhibit 4) was segregated into upstream (front-end) and
downstream (back-end) components. The upstream component comprised the procurement of business; the
downstream component comprised processing of the diagnostic tests. Most diagnostic companies were
present in both the upstream and downstream segments of the value chain.25 The upstream business required
building close relationships with the doctors to secure referrals, and thereby gain higher volumes of samples
for testing. It also required trained personnel to procure the samples directly from the patients at their homes
and then bring the samples to the diagnostic company. The downstream business required capabilities that
would facilitate the company being able to perform the tests accurately at the lowest cost. Diagnostic chains
marketed their services to customers through their own marketing staff, campaigns, and building
relationships with doctors and corporate houses. Doctor referrals constituted almost 55 per cent of the
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diagnostic business. Walk-in patients comprised approximately 35 per cent, and the remaining 10 per cent
consisted of corporate patients.26 The doctor referral business was largely secured through intermediaries,
generally known as partners or agents, who were independent parties with contractual ties to multiple
diagnostic laboratories. These agents chose the diagnostic centre where samples would be sent for testing,
based on the commission amount they received from the laboratories.27
Large pan-India diagnostic chains adopted the hub-and-spoke model of business operations (see Exhibit 5).
Many of the large players had more than 100 laboratories spread across the country. A large number of
collection centres were the primary catchment points for samples that were then directed to one of the
company’s laboratories for testing. Some collection centres also had testing facilities. The components of
the hub-and-spoke model typically included a national reference laboratory, a regional reference laboratory,
satellite laboratories, and collection centres.28 Based on the complexity of the test, a satellite laboratory,
which was either owned or franchised by the diagnostic chain, transferred samples to a regional reference
laboratory or a national reference laboratory. The national reference laboratories, spread over an area of
2,000–3,000 square feet (180 to 280 square metres), were located centrally and typically also served as the
corporate headquarters of the diagnostic chain.29
Pathology testing across India was variably cost intensive (see Exhibit 6). Margins were primarily
determined by two factors: the diagnostic chain’s pricing policy and its cost structure. Given the dynamism
of these factors, margins in the industry were sometimes significantly different. Around 70 per cent of the
costs were variable in nature, and the balance were fixed over the short to medium term. The industry
enjoyed an average EBITDA margin of around 27 per cent (EBIT margin 22 per cent; net margin 15 per
cent). The consumables and reagents used in testing processes were supplied by the testing equipment
suppliers. If a lab committed to greater volumes of reagent orders, the supplier would offer the reagents at
substantially lower unit costs. Staff costs depended, of course, on the head count, which in turn depended
on the type of pathology tests the laboratory ran and the extent of human intervention required during the
testing process, as well as the productivity levels of the staff. The number of laboratories and collection
centres a diagnostic chain had also affected staff and rental costs. Overheads included logistics, information
technology, communication, printing, legal, and auditing costs (see Exhibit 6). The industry defined “floor
cost” as total costs less reagent cost. Floor efficiency, being the floor cost as a percentage of revenue,
reflected the operational efficiency and was a key profit driver. The business was highly cash intensive,
with payments received upfront.
Unit cost of various pathology and imaging tests were wide ranging and dependent on volumes. The cost
per test for thyroid profiles and vitamin D fell steeply with increased volumes, as compared to unit costs of
tests like complete blood count (or CBC) and sugar, which remained more or less flat with increased
volumes. The same applied to imaging diagnostics. The cost per test of PET/CT and magnetic resonance
imaging (or MRI) fell steeply with increased volumes, whereas X-ray and ultrasound costs per test were
more or less flat over increased volumes (see Exhibit 7). As a result, the type of testing a diagnostic centre
chose to offer was a major driver for the company’s cost structure; and eventually, its operating margins.
Beyond 2017, the diagnostic industry was likely to benefit from the higher disposable income resulting from the
country’s macroeconomic improvement, awareness of preventive care, and the health care industry moving
toward a greater focus on evidence-based treatment. These factors were expected to drive the diagnostic industry
growth of 16 per cent to 17 per cent per annum,30 and the large pan-India diagnostic chains were likely to grow
at a faster pace. Large numbers of private equity investors were willing to fund smaller and regional diagnostic
chains to scale and become regional and pan-India players; in effect moving the industry from unorganized to
organized.31 The healthy margins that existed in the business could come under pressure with the increasing
competitive rivalry.32 As more online aggregators entered the market, pricing pressures were inevitable, and
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transparency became more prevalent.33 In addition, public-private partnerships were emerging.34 The concepts
of point-of-care and self-test kits for home use by patients (such as for blood sugar monitoring) were expected
to become substitutes for laboratory testing, albeit not rapidly.35
INDUSTRY PLAYERS
SRL Diagnostics was the largest pan-India chain in the country. Dr. Lal PathLabs, the second largest player,
was listed in the stock markets,36 as was Thyrocare Technologies, which was also a pan-India player. Medall
and Metropolis also operated large pan-India diagnostic operations, 37 both of which were not yet listed on
the stock markets; therefore, little operational and financial data was available in the public domain. These
five companies controlled under 10 per cent of total market share (see Exhibit 8). The key operational
highlights of Thyrocare, Dr. Lal PathLabs, and SRL Diagnostics varied considerably (see Exhibit 9), as did
their respective profit and loss accounts (see Exhibit 10) and their balance sheets (see Exhibit 11) for the
three years ended March 31, 2017.
SRL Diagnostics
SRL Diagnostics was founded in 1995 by promoters who were part of the Fortis Hospitals group. It was the
largest diagnostics company in India in terms of revenue, with an impressive reach of approximately 359
laboratories and performing close to 125,000 tests per day. The range of tests offered—over 3,500 of them
(out of a possible 4,000)—spanned pathology, molecular biology, and microbiology. SRL Diagnostics had
the largest menu of tests in India.38 Its focus area was hospital laboratory management, where hospitals
outsourced their captive laboratories to specialists to manage them efficiently. SRL Diagnostics managed
laboratories in more than 100 hospitals across India, employing around 6,000 staff members. Additionally,
the company provided services testing samples for multinational and Indian pharmaceutical companies and
contract research organizations that were undertaking Phase III and IV clinical trial work.39 During 2017, SRL
Diagnostics processed 15.0 million samples (see Exhibit 9).
Dr. Lal PathLabs
Dr. Lal PathLabs was one of India’s top and oldest diagnostic chains. It was founded in 1949 and grew to
have a pan-India presence with a robust network of close to 205 laboratories spread across the country. It
conducted close to 3,500 tests and had more than 3,000 employees who conducted specialized tests ranging
from molecular diagnostics to cytogenetic, flow cytometry, immunohistochemistry, and microbiology. 40
During 2017, Dr. Lal PathLabs processed 29.3 million samples (see Exhibit 9).
Thyrocare Technologies
Founded in 1996 by Velumani, Thyrocare was India’s first fully automated diagnostic laboratory, and with
a pan-India presence, its single CPL and six regional processing laboratories (RPLs) processed 14 million
samples in 2017 (see Exhibit 9). Thyrocare offered a gamut of 68 tests for ₹1,450that included vitamin D
(25-OH) and thyroid profile testsunder its Aarogyam 1.3 scheme41. How was Thyrocare able to offer such
a competitive price? Was such pricing a mere discounting strategy? However, it had been offering such low
prices for 20 years, while continuing to be the most profitable company in the industry!
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Thyrocare’s founding philosophy
Velumani had a science degree from the University of Madras, and a post-graduate degree in science and a
doctorate in philosophy (science) from the University of Bombay. He was born in 1959 to a landless farmer
in a tiny village 26 kilometres from Coimbatore, in the state of Tamil Nadu, as he explained:
My mother, Sayammal, was a simple, honest and hardworking woman with focus, frugality,
simplicity and determination as her jewels. My father worked hard, but over time started growing
worrisome on how to feed our family. Seeing his helplessness, my mother quickly and decisively
invested in two buffaloes and reared them. She sold milk in the market, which fetched ₹50 every
week; this sustained our family for almost 10 years. We were brought up in an environment that
highly valued money, soaked in frugality with no leeway for extravagance.
Velumani said that such frugality later shaped him and became Thyrocare’s founding philosophy. In 1978,
at age 19, Velumani got his degree and could not find a job, without any experience. His English language
skills were poor, which added to his struggles. He was finally hired by a capsule-making factory as a
chemist, with a salary of ₹150 per month. He would keep ₹50 for himself and send ₹100 home to his parents,
who needed the money to educate his siblings. After working at the company for four years, Velumani
resigned from the job and joined the Bhabha Atomic Research Centre in Mumbai as a scientific officer, for
what seemed to him a princely salary of ₹880 per month. After working tirelessly for 15 years in that
government job, a kind of restlessness began setting in that drove Velumani to juggle fatherhood with his
doctorate of philosophy in thyroid biochemistry.
Velumani founded Thyrocare in 1996 with initial capital of ₹200,000, renting small premises of only 200
square feet (18 square metres) in Byculla, Mumbai. As Velumani recalled, “In 1995, without consulting
anyone, not even my wife Sumathi, I resigned from my ‘secure’ job. The very next day, my wife also quit
her job in State Bank of India after 16 years of association.”
In 2016, Thyrocare went public with an initial public offering (IPO) that was oversubscribed more than 75
times. Within the first year of listing on the National Stock Exchange and the Bombay Stock Exchange, the
company’s market capitalization grew by 60 per cent. In 2017, the company was worth ₹33.45 billion.
Roughly 100 days before Thyrocare’s IPO hit the market, in 1996, Velumani lost his 55-year-old wife to
pancreatic cancer. Their son, Anand Velumani, and daughter, Amruta Velumani, both had master’s degrees
in biotechnology and worked for Thyrocare. Velumani described their role:
My children are frugal with their spending and approach to life. I think the values instilled by my
wife and me will hold them in good stead no matter what. Frugality is the cornerstone of both my
life as well as Thyrocare’s; I can proudly say that for over two decades, Thyrocare has offered tests
to patients at a fraction of the cost of competitors.
Thyrocare’s operating model
Thyrocare focused on the downstream business of processing samples and operated completely through a
franchise model. This model was structured through an authorized service provider (ASP) and direct sales
associates network as Thyro Service Providers (TSP) and Thyro Aggregators (TAG). As of 2017, Thyrocare
had 1,041 ASPs made up of 357 TSPs and 687 TAGs. Thyrocare’s operational model was different from
the industry’s hub-and-spoke model; it did not have collection centres or satellite laboratories. Instead, it
had just six RPLs and one CPL of large scale. The collection of samples was handled by the ASPs. While
the industry benchmark for commissions to partners and agents was around 25 per cent, Thyrocare offered
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almost double that amount. This nurtured a breed of highly loyal partners, who provided Thyrocare with
high volumes of business. After collecting samples, ASPs delivered them to Thyrocare’s RPLs, which
would send the samples to the CPL in Mumbai or to one of the six RPLs located around the country (see
Exhibit 12). Velumani recollected how the operational model worked:
Procurement of samples involved a completely different set of capabilities in comparison to

efficiently processing the samples. It was very difficult for anyone to perform both parts of the
value chain effectively and efficiently. I used the analogy of kitchen and restaurant, in this context.
Thyrocare will be and will remain the kitchen—that is, the back-end or downstream—one big
kitchen to the consumers and other customers. It will not attempt to do the restaurant business—
that is, the front-end or upstream. I had a kitchen, I didn’t have a restaurant; it was very clear from
the beginning and there was no confusion.
The industry norm was to offer the whole gamut of pathology tests end-to-end, covering both sickness and
wellness, diseases and disorders, which would help physicians accurately diagnose the patient’s malady.
Competitors offered somewhere between 2,500 and 4,000 tests.42 Conversely, Thyrocare offered only
around 200 tests, primarily related to biochemistry and focused on disorder and wellness. In fact, Thyrocare
started off in 1996 as solely a thyroid testing laboratory; it offered thyroid tests for ₹100, when the
competition was offering the same for ₹500. Over the next two decades, it substantially expanded its
offerings, and by 2017, it was offering a complete range of biochemistry tests. Still, Thyrocare did not offer
tests in the pathology segment. For the types of tests that Thyrocare did not offer, and which its customers
wanted, the company outsourced them to third-party laboratories, rather than try to perform the tests itself.
Thyrocare was criticized for missing out on huge opportunities in a fast-growing market that its competitors
were capitalizing on. However, Velumani responded as follows:
Thyrocare believed that customers looked for transparency and accuracy in testing results, speed,
trust, convenience, and above all, an affordable price. I had strived to build capabilities that
precisely delivered such value propositions to my customers, at the lowest cost.
Thyrocare was among the first in the industry to promote preventive care diagnostics on a large scale
through its business-to-consumer (B2C) brand Aarogyam, which focused on the wellness segment. The
brand offered a battery of metabolic tests intended to diagnose lifestyle-related disorders at an early stage.
In 2017, more than 50 per cent of its revenue came from this B2C segment. Wellness and preventive care
were less well-penetrated segments and provided a wider scope for future growth, 16 as Velumani explained:
By choosing “preventive care” tests, my patients were vertical, walking, and were in offices or
homes, while my competitors serviced the “sick care” segment, where their patients were
horizontal, bed ridden and in hospitals; that way I had a higher “under-penetrated” market, having
repeat customers, to cover.
Along with the one CPL, Thyrocare eventually added its six RPLs spread across the country, but it still
operated through only seven testing facilities in total (see Exhibit 9), as Velumani explained:
Thyrocare’s CPL had set a precedent in the industry and continues to stand out as a benchmark of
excellence. Air cargo logistics help the samples from across the country to reach the central
laboratory, the same night, before midnight. The samples then were turned around in the next four
hours. Processing all samples under the same roof had helped the company achieve scale economies
and maximize capacity utilization with respect to its equipment and facilities. Thyrocare’s CPL could
perform all tests offered while the RPLs were equipped to perform the tests that were more routine in
nature leaving the high value adding tests to move to the CPL. The majority of the samples continued
to be processed by the CPL. The seven labs processed 14.3 million samples during 2017.
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With the laboratory volumes sharply increasing, in 2014, Thyrocare installed the 300-foot (93.5-metre) track
that connected the input, output, pre-processing, and post-processing modules of the analyzers. The track was
equipped with built-in barcode scanners along with its own dedicated sample managers to handle sample flow
and data management systems. It was driven by a bar-coded bi-directionally-interfaced system that was
integrated with a robust information technology system and instrumentation infrastructure, to provide accurate
and transparent results to patients and doctors, with minimal errors (see Exhibit 13). In 2017, despite its
capacity to hold 54.8 million samples and 273.8 million tests annually at the CPL, Thyrocare was handling
14.3 million samples and 76.4 million tests per year. The recently installed six RPLs also provided substantial
headroom capacity for future expansion (see Exhibit 14). These volumes gave the company a cushion to
improve its future returns, without little capital investment in the short to medium term.
Thyrocare’s long-term relationships with reagents and consumable vendors, backed by large volumes, facilitated
strong negotiating power and lowest-cost procurement. The equipment was sourced through a leasing model,
resulting in minimal capital expenditures, in exchange for a commitment to purchase certain volumes of reagents
and consumables; the higher the volumes, the lower the reagent cost, as Velumani explained:
Thyrocare had remained debt-free since inception and expansions had always been through internal
funding. Given the superior working capital management, the company made advance payments for
equipment vendors securing cash discounts on procurement. In a sense, Thyrocare became an
industry aggregator for certain types of tests, given the cost advantage that Thyrocare enjoyed; other
stand-alone and small labs in the country were compelled to outsource their volumes to Thyrocare.
There were no superfluous positions in the company. The industry norm was to have many senior positions
designated as vice-president, who along with their personal assistants handled different functionalities.
Thyrocare, however, avoided that practice. While competitors had large-scale establishments covering
business units and regional leaderships, Thyrocare’s organizational structure was simple and frugal (see
Exhibit 15). Velumani highlighted this aspect:
A small team of senior managers and industry professionals, along with my children and my
brother, Mr. Sundaraju, managed the complete operations of the company. Travel expenses were
incurred only when absolutely necessary. There was always an eye for cost and this was a defining
culture within Thyrocare.
The company had a team of around 850 employees with strong domain expertise; for most of them,
Thyrocare was their first employer. With a people-centric philosophy, the company was able to maintain
an extremely low attrition rate and a very young workforce.
Thyrocare used radioimmunoassay (RIA) technology for testing its samples. This technology was
conducive to a highly manual-intensive operational process that required frequent manual interventions by
knowledgeable and highly skilled laboratory technicians. However, when the number of tests at the CPL
increased beyond 50,000 tests per day, the company switched over to chemiluminescence immunoassay
(CLIA) technology, which was more expensive in terms of capital intensity, but was highly conducive to
large-scale sample processing, automation, simplicity, and minimal human intervention (see Exhibit 16).
Many large players in the industry had moved to CLIA even when the number of samples processed was
substantially lower, but subsequently used both RIA and CLIA technologies, operating in parallel, and
followed a dual pricing model. Tests processed through CLIA were charged double the cost of tests
processed through RIA. Thyrocare’s pricing was, however, independent of the technology used, and CLIA
usage only lowered its costs. As a result, it was able to offer a uniform lower price to the market. As
Velumani stated, “It was not fair to say that all my choices and moves in business were totally pre-planned
and they all worked successfully. There were mistakes and wrong moves, but being a scientist, I had a very
good eye for detail and was able to quickly learn from such events.”
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By 2014, Thyrocare had diversified into the nuclear imaging business with PET-CT scans. It developed a
network of molecular imaging centres for cancer diagnosis through its wholly-owned subsidiary company
Nuclear Healthcare Limited, which offered scans at 40 per cent to 50 per cent lower cost than the
competition.43 It had already invested in 11 PET-CT and cyclotron machines. Its model for growth in this
business was through franchises, where a proportion of the capital-intensive investments and returns were
shared among the franchise partners. By 2017, the PET-CT machines achieved 9.1 scans per day per
machine. Thyrocare’s goal was to set up 60 PET-CT scanners and four cyclotron facilities across India by
2022, and to achieve an average of 30 scans per day, booking an annual revenue of ₹1 billion with 60 per
cent EBITDA margins.
As of 2017, Thyrocare had forayed into tuberculosis testing, and believed it to be a sizable opportunity in
the foreseeable future.44 Thyrocare had begun testing water samples, and was operating under the brand
Whaters, testing for physical, chemical, microbiological, pesticidal, and volatile organic elements in water
samples. To further its core business, the company had also set up a chain of clinics branded as Thyrocare
Metabolic Clinics, a nationwide branded chain for individuals with chronic illnesses or who planned to
undergo a health care procedure. Thyrocare offered the SugarScan blood glucose monitor, a self-testing kit
to instantly determine the user’s blood glucose levels. It had also planned an aggressive overseas thrust by
expanding its international presence. Its financial projections for the next three years were comparable to
those of Dr. Lal PathLabs (see Exhibit 17).
LOOKING BEYOND 2017
The competitors, especially the larger pan-India chains, were becoming aggressive; many of them were
attempting to imitate the Thyrocare model. They were entering the wellness market by building business-to-
consumer brands that directly connected with patients and lowering their prices to gain market share. Emerging
stringent government regulations and price controls were expected to affect profit margins for all competitors,
which raised many questions for Thyrocare’s future. Could the company’s unique operating model remain
inimitable? Could Thyrocare preserve its competitive advantage and preserve its superior profit margins? Should
the company diversify beyond biochemistry? How should it view the water testing and wellness clinic
businesses? Should Thyrocare expand internationally or focus more on the device business? Velumani also had
to consider that the capital-intensive nuclear imaging business did not provide centralization and scale
advantages. All of these factors were on Velumani’s mind as he walked through his laboratory.
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EXHIBIT 1: INDIAN DIAGNOSTIC INDUSTRY—ORGANIZED AND UNORGANIZED
Companies Market Share

Unorganized:
Health Centres, Nursing Homes, Regional Players 37%
Stand-Alone Laboratories, Small Diagnostic
48%
Centres
Organized:
Multichain Diagnostic Centres 8%–9%
Pan-India Hospitals 6%–7%
Source: Created by the case authors with Thyrocare data and Surajit Pal, “Thyrocare Technologies: Pathology and Imaging
Business Both at Inflexion Point,” Prabhudas Lilladher, November 17, 2016, accessed August 14, 2019,
www.dsij.in/productattachment/BrokerRecommendation/ThyrocareTech_BUY_Prabhudas_18.11.16.pdf, Exhibit 2.
EXHIBIT 2: INDIAN DIAGNOSTIC INDUSTRY—PATHOLOGY AND IMAGING
Diagnostic Type Market Share

Pathology 56%
Imaging 44%
Source: Created by the case authors with information from Surajit Pal, “Thyrocare Technologies: Pathology and Imaging
Business Both at Inflexion Point,” Prabhudas Lilladher, November 17, 2016, accessed August 14, 2019,
EXHIBIT 3: INDIAN DIAGNOSTIC INDUSTRY—PATHOLOGY TESTS BREAKDOWN
Type of Pathology Test Industry Share

Immunology 22%
Hematology 18%
Biochemistry 39%
Sugar and Lipid Profile 12%
Other Biochemistry Tests (e.g., Thyroid) 27%
Others 21%
Source: Created by the case authors with information from Surajit Pal, “Thyrocare Technologies: Pathology and imaging
business Both at Inflexion Point,” Prabhudas Lilladher, November 17, 2016, accessed August 14, 2019,
Page 11 9B20M096
EXHIBIT 4: DIAGNOSTIC INDUSTRY VALUE CHAIN
Note: B-2-B = business to business; B-2-C = business to consumer.

Source: Created by the case authors with Thyrocare data and company files.
EXHIBIT 5: DIAGNOSTIC INDUSTRY, HUB-AND-SPOKE MODEL
Source: Created by the case authors with Thyrocare data and company files, and Thyrocare Technologies Limited, Draft Red
Herring Prospectus, December 30, 2015, accessed May 30, 2018,
www.sebi.gov.in/sebi_data/attachdocs/1451886138156.pdf.
Page 12 9B20M096
EXHIBIT 6: INDIAN DIAGNOSTIC INDUSTRY— INDICATIVE COST STRUCTURE
Percentage
Cost Type Nature of Cost
of Revenue
Consumables 25% Predominantly Variable
Staff Costs 20% Predominantly Fixed
Commissions to Partners 10% Predominantly Variable
Rentals 4% Predominantly Fixed
Other Overhead 14% Predominantly Variable
Depreciation 5% Predominantly Fixed
Financing Costs 1% Predominantly Fixed
Taxes 6%
Net Profits 15%
100%
EBITDA (%) 27%
EBIT (%) 22%
Net Profits (%) 15%
Note: EBIT = Earnings before interest and tax; EBITDA = earnings before interest, tax, depreciation, and amortization.
Source: Created by the case authors with company files.
EXHIBIT 7: COST PER TEST—VOLUME RELATIONSHIP
EXHIBIT 8: MARKET SHARE OF TOP FIVE PAN-INDIA DIAGNOSTIC CHAINS
Company Market Share

Thyrocare Technologies 0.8%
SRL Diagnostics 2.5%
Dr. Lal PathLabs 2.4%
Metropolis 0.8%
Medall 1.5%
Source: Created by the case authors with company files and Surajit Pal, “Thyrocare Technologies: Seasonality Impact
Diagnostics Volume Growth,” February 9, 2018, accessed May 30, 2018, www.plindia.com/SampleReports/THYROCAR-9-2-
18-PL.pdf; Prabhudas Lilladher, “Dr. Lal PathLabs: Exploring Ways and Means to Maintain Growth and Profitability,” August
7, 2017, accessed May 30, 2018, www.plindia.com/ViewReport.aspx?rpt=1821.
Page 13 9B20M096
EXHIBIT 9: KEY OPERATIONAL HIGHLIGHTS
Parameters Thyrocare Dr. Lal Pathlabs SRL Diagnostics

Founded 1996 1949 1995
Geographic presence Pan-India Pan-India Pan-India
Overseas locations 3 16 9
Central laboratory 1 None None
Regional laboratories 6 189 350
1,200 (franchises;
Collection centres authorized service 1,074 1,100
providers)
Samples processed per year (in million) 14.3 29.3 15.0
Pathology,
Biochemistry,
molecular
Business scope nuclear imaging, Pathology, imaging
diagnostics,
testing equipment
imaging
Wellness (in % of total revenue) Over 50% Minimal Less than 5%
Revenue (in ₹ million.) 3,158 9,375 9,519
Revenue growth 2014–17 CAGR (%) 28.6% 17.7% 32.0%
Primarily
Revenue profile Primarily pathology Primarily pathology
biochemistry
50% walk-in/direct, 30%
1,200 franchise 40% walk-in, 60%
Channel collection centres, 20%
partners collection centres
hospitals
Employees 850 3,746 6,000
Accreditations NABL, CAP, ISO NABL, CAP, ISO NABL, CAP, ISO, NGSP,
Note: ₹ = INR = Indian rupee; CAGR = compound annual growth rate; NABL = National Accreditation Board for Testing and
Calibration Laboratories; NGSP = National Glycohemoglobin Standardization Program; CAP = College of American Pathologists;
ISO = International Organization for Standardization.
Source: Created by the case authors with Thyrocare data and information from Surajit Pal, “Thyrocare Technologies: Seasonality
Impact Diagnostics Volume Growth,” February 9, 2018, accessed May 30, 2018, www.plindia.com/SampleReports/THYROCAR-9-
2-18-PL.pdf; Prabhudas Lilladher, “Dr. Lal PathLabs: Exploring Ways and Means to Maintain Growth and Profitability,” August 7,
2017, accessed May 30, 2018, www.plindia.com/ViewReport.aspx?rpt=1821.
EXHIBIT 10: PROFIT AND LOSS STATEMENT (IN ₹ MILLION)
Thyrocare Dr. Lal PathLabs SRL Diagnostics

Y/E March 31 2015 2016 2017 2015 2016 2017 2015 2016 2017
Net Sales 1,911.0 2,475.0 3,158.0 6,625.0 7,963.0 9,186.0 5,468.0 8,962.0 9,519.0
Less: Cost of
1,083.0 1,442.8 1,879.3 5,036.0 5,624.0 6,506.0 4,110.0 7,238.0 7,373.0
goods sold
Gross Profit 828.0 1,032.2 1,278.7 1,589.0 2,339.0 2,680.0 1,358.0 1,724.0 2,146.0
Selling, general,
and administrative 23.0 32.2 4.7 0.0 191.0 252.0 150.0 191.0 294.0
expenses
EBITDA 805.0 1,000.0 1,274.0 1,589.0 2,148.0 2,428.0 1,208.0 1,533.0 1,852.0
Depreciation and
129.0 182.0 180.0 282.0 283.0 282.0 301.0 636.0 497.0
amortization
EBIT 676.0 818.0 1,094.0 1,307.0 1,865.0 2,146.0 907.0 897.0 1,355.0
Financing costs 0.0 0.0 0.0 −90.0 −142.0 −187.0 193.0 236.0 78.0
PBT 676.0 818.0 1,094.0 1,397.0 2,007.0 2,333.0 714.0 661.0 1,277.0
Income tax 224.0 300.0 385.0 433.0 675.0 781.0 0.0 243.0 357.0
PAT, or Net Income 452.0 518.0 709.0 964.0 1,332.0 1,552.0 714.0 418.0 920.0
Page 14 9B20M096
EXHIBIT 10 (CONTINUED)
Breakdown of Costs into Key Elements (in ₹ Million)

Year ended March 31 2015 2016 2017 2015 2016 2017 2015 2016 2017
Staff cost 175 257 311 1,344 1,368 1,634 1,170 1,912 2,093
Reagent and consumables 493 630 815 1,392 1,729 1,971 1,491 2,243 2,380
Rental cost 17.73 54.05 57.42 314 382 441 215 368 345
Floor cost 742 1,027 1,249 3,930 4,374 5,071 3,263 6,058 5,862
Note: ₹ = INR = Indian rupee; EBIT = earnings before interest and tax; EBITDA = earnings before interest, tax, depreciation,
and amortization; PAT = profit after tax; PBT = profit before tax; Y/E = year ended.
Source: Created by the case authors with information from Thyrocare Technologies Limited, Annual Report 2016–17, May 9,
2017, accessed May 30, 2018, http://investor.thyrocare.com/wp-content/uploads/2017/03/Thyrocare-Annual-Report-2016-
17.pdf; Thyrocare Technologies Limited, Annual Report 2015–16, 20 Years of Vision, Volumes, Velocity, June 11, 2016,
accessed May 30, 2018, http://investor.thyrocare.com/wp-content/uploads/2016/03/UNTITLED.pdf; Dr. Lal PathLabs Limited,
Annual Report 2016–17, May 12, 2017, accessed May 30, 2018, www.lalpathlabs.com/pdf/annual-report-2016-17.pdf; Dr. Lal
PathLabs Limited, Annual Report 2015–16, May 27, 2016, accessed May 30, 2018, www.lalpathlabs.com/pdf/annual-report-
2015-16.pdf; SRL Diagnostics Limited, Annual Report 2016–17, May 30, 2017, accessed May 30, 2018,
www.srlworld.com/investors; SRL Diagnostics Limited, Annual Report 2015–16, 2016, accessed May 30, 2018,
www.srlworld.com/investors; Surajit Pal, “Thyrocare Technologies: Seasonality Impact Diagnostics Volume Growth,” February
9, 2018, accessed May 30, 2018, www.plindia.com/SampleReports/THYROCAR-9-2-18-PL.pdf; Prabhudas Lilladher, “Dr. Lal
PathLabs: Exploring Ways and Means to Maintain Growth and Profitability,” August 7, 2017, accessed May 30, 2018,
www.plindia.com/ViewReport.aspx?rpt=1821.
EXHIBIT 11: BALANCE SHEET (IN ₹ MILLION)

(Consolidated) (Consolidated) (Consolidated)
As of March 31 2015 2016 2017 2015 2016 2017 2015 2016 2017
Stockholders’ Equity
Share Capital 505 537 537 813 827 831 845 846 804
Retained Earnings 2,258 3,119 3,531 2,598 4,246 5,767 5,739 6,095 8,469
Stockholders’ Equity 2,763 3,656 4,068 3,411 5,073 6,598 6,584 6,941 9,273
Long-term Liabilities 423 58 75 222 269 305 2,448 1,683 167
Long-Term Provisions 32 68 52 2 2 3 78 88 100
Long-Term Liabilities 455 126 127 224 271 308 2,526 1,771 267
Capital Employed 3,218 3,782 4,195 3,635 5,344 6,906 9,110 8,712 9,540
Fixed Assets
Property, Plant, and
Equipment 1,545 1,524 1,686 915 1,123 1,300 3,154 2,816 2,662
Intangible Assets
Intangible Assets 469 1,082 1,075 595 574 778 4,785 4,765 4,777
Other Assets
Other Assets 170 148 134 426 317 457 1,063 960 1,002
Current Assets
Cash and Cash
Equivalents 51 103 116 1,482 2,099 2,383 167 211 195
Current Investments 843 916 1,015 379 643 1,046 30 28 368
Net Receivables 49 75 62 310 363 418 1,028 1,074 1,466
Inventories 74 107 145 143 145 179 266 275 280
Others 90 143 126 503 987 1,080 329 92 86
Total Current Assets 1,107 1,344 1,464 2,817 4,237 5,106 1,820 1,680 2,395
Page 15 9B20M096
EXHIBIT 11 (CONTINUED)
Current Liabilities
Accounts Payable 8 20 7 342 422 523 690 764 810
Provisions 16 191 22 190 310 67 47 74 82
Others 49 105 135 586 175 145 975 671 404
Total Current Liabilities 73 316 164 1,118 907 735 1,712 1,509 1,296
Net Current Assets 1,034 1,028 1,300 1,699 3,330 4,371 108 171 1,099
Total Assets 3,218 3,782 4,195 3,635 5,344 6,906 9,110 8,712 9,540
Note: ₹ = INR = Indian rupee.

Source: Thyrocare Technologies Limited, Annual Report 2016–17, May 9, 2017, accessed May 30, 2018,
http://investor.thyrocare.com/wp-content/uploads/2017/03/Thyrocare-Annual-Report-2016-17.pdf; Thyrocare Technologies
Limited, Annual Report 2015–16, 20 Years of Vision, Volumes, Velocity, June 11, 2016, accessed May 30, 2018,
http://investor.thyrocare.com/wp-content/uploads/2016/03/UNTITLED.pdf; Dr. Lal PathLabs Limited, Annual Report 2016–17,
May 12, 2017, accessed May 30, 2018, www.lalpathlabs.com/pdf/annual-report-2016-17.pdf; Dr. Lal PathLabs Limited, Annual
Report 2015–16, May 27, 2016, accessed May 30, 2018, www.lalpathlabs.com/pdf/annual-report-2015-16.pdf; SRL Limited,
Annual Report 2016–17, May 30, 2017, accessed May 30, 2018, www.srlworld.com/investors; SRL Limited, Annual Report
2015–16, 2016, accessed May 30, 2018, www.srlworld.com/investors.
EXHIBIT 12: THYROCARE OPERATIONAL MODEL
2015-16.pdf; SRL Limited, Annual Report 2016–17, May 30, 2017, accessed May 30, 2018, www.srlworld.com/investors; SRL
Limited, Annual Report 2015–16, 2016, accessed May 30, 2018, www.srlworld.com/investors.
Page 16 9B20M096
EXHIBIT 13: IT INFRASTRUCTURE
Since inception, Thyrocare has led the industry in adoption of the latest technologies. At a time when the industry relied
heavily on manual processing, Thyrocare revolutionized the industry by making sizable investments in automation
technologies. Its investment in technology has been in two key areas: information technology and high-end equipment.
The following are some of the salient developments:
 QLC (quad-level cell): Enables any person or organization with sample collection capabilities to outsource sample
processing by managing operations completely online.
 Thyrocare Mobile Application: Facilitates individuals to gain access to personalized preventive health care
services, along with the facility of booking them and downloading reports online.
 Chabri: Facilitates seamless connectivity between authorized service providers and centralized processing
laboratories (CPL) through a virtual network for uploading work orders, delivering reports, tracking operational
statistics, and managing clients, patients, doctors, orders and materials. It also ensures smooth communication
with the company.
 Thyrosoft: Facilitates seamless connectivity between regional processing laboratories (RPL) and the CPL through
a virtual network, which is also connected to the Charbi software, facilitating the sharing of data related to orders
and reports between the RPLs and the CPL.
 Bar-coded and bi-directionally interfaced system: Enables redirecting of vials to correct analyzer for processing
and simultaneously synchronizes output data with the software to generate and upload the reports on the website.
This ensures the right test is done on the right specimen, ensuring right results generation.
2015-16.pdf; SRL Limited, Annual Report 2016–17, May 30, 2017, accessed May 30, 2018, www.srlworld.com/investors; SRL
Limited, Annual Report 2015–16, 2016, accessed May 30, 2018, www.srlworld.com/investors.
EXHIBIT 14: REGIONAL PROCESSING LABORATORIES—CAPACITY UTILIZATION
Regional Processing Laboratories (RPL) Capacity Utilization Utilization (%)

Kolkata 10,000 4,000 40%
New Delhi 10,000 8,000 80%
Coimbatore 7,000 3,500 50%
Hyderabad 6,000 4,000 67%
Bhopal 6,000 2,500 42%
Bengaluru 5,000 2,000 40%
Total samples in RPLs per day 44,000 24,000 55%
Average sample per day per RPL 7,333 4,000
Total tests in RPLs per day (1:5 ratio) 2,20,000 1,20,000 55%
Page 17 9B20M096
EXHIBIT 15: THYROCARE ORGANIZATIONAL STRUCTURE
Board of Directors
CFO
General Manager General Manager General Manager Senior IT

Business Laboratory Infrastructure Officer
Development
Deputy General
Deputy General
Manager
Manager
Regional Lab
Lab Processing Head
Processing General Manager
Legal and
Finance
Secretarial
Note: CFO = chief financial officer; IT = information technology.

Source: Created by the case authors with company files.
EXHIBIT-16: AUTOMATION TECHNOLOGY COST–VOLUME RELATIONSHIP
Note: RIA = RIA = radioimmunoassay technology; CLIA = chemiluminescence immunoassay technology.

Page 18 9B20M096
EXHIBIT 17: FINANCIAL PROJECTIONS (IN ₹ MILLION)

(Consolidated) (Consolidated) (Consolidated)
As of March 31 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F
Stockholders’ Equity
Share capital 537 537 537 831 831 NA NA NA NA
Retained earnings 3,820 4,384 5,219 7,040 8,761 NA NA NA NA
Stockholders’ Equity 4,357 4,921 5,756 7,871 9,592 NA NA NA NA
Long-term liabilities 78 82 86 3 3 NA NA NA NA
Long-term provisions 57 58 59 223 307 NA NA NA NA
Long-Term Liabilities 135 140 145 226 310 NA NA NA NA
Capital Employed 4,492 5,061 5,901 8,097 9,902 NA NA NA NA
Fixed Assets
Property: plant and equipment 1,693 1,804 1,854 1,754 2,069 NA NA NA NA
Intangible Assets
Intangible assets 1,069 1,069 1,069 578 578 NA NA NA NA
Other Assets
Other assets 44 −30 −118 307 319 NA NA NA NA
Current Assets
Cash and cash equivalents 469 869 1,598 3,284 4,662 NA NA NA NA
Current investments 1,116 1,228 1,351 1,099 1,154 NA NA NA NA
Net receivables 0 0 0 0 0 NA NA NA NA
Inventories 0 0 0 0 0 NA NA NA NA
Others 289 322 360 1,878 2,063 NA NA NA NA
Total current assets 1,874 2,419 3,309 6,261 7,879 NA NA NA NA
Current Liabilities
Accounts payable 0 0 0 0 0 NA NA NA NA
Provisions 0 0 0 0 0 NA NA NA NA
Others 189 200 213 803 943 NA NA NA NA
Total current liabilities 189 200 213 803 943 NA NA NA NA
Net current assets 1,685 2,219 3,096 5,458 6,936 NA NA NA NA
Total Assets 4,491 5,062 5,901 8,097 9,902 NA NA NA NA
Y/E March 31 2018F 2019F 2020F 2018 2019
Net Sales 3,794 4,689 5,664 11,262 13,724 NA NA NA NA
Less: Cost of goods sold 2,136 2,603 3,149 8,194 10,055 NA NA NA NA
Gross Profit 1,658 2,086 2,515 3,068 3,669 NA NA NA NA
Selling, general, and
0 0 0 0 0 NA NA NA NA
administrative expenses*
EBITDA 1,658 2,086 2,515 3,068 3,669 NA NA NA NA
Depreciation and amortization 197 244 300 399 355 NA NA NA NA
EBITDA 1,461 1,842 2,215 2,669 3,314 NA NA NA NA
Financing costs 4 0 0 1 0 NA NA NA NA
PBT 1,457 1,842 2,215 2,668 3,314 NA NA NA NA
Income Tax 496 626 731 827 1,028 NA NA NA NA
PAT 961 1,216 1,484 1,841 2,286 NA NA NA NA
Note: ₹ = INR = Indian rupee; F = final; NA = not available; EBIT = earnings before interest and tax; EBITDA = earnings before interest, tax,
depreciation, and amortization; PAT = profit after tax; PBT = profit before tax; Y/E = year ended.
Source: Created by the case authors with Thyrocare data and Surajit Pal, “Thyrocare Technologies: Seasonality Impact Diagnostics
Volume Growth,” February 9, 2018, accessed May 30, 2018, www.plindia.com/SampleReports/THYROCAR-9-2-18-PL.pdf;
Prabhudas Lilladher, “Dr. Lal PathLabs: Exploring Ways and Means to Maintain Growth and Profitability,” August 7, 2017, accessed
May 30, 2018, www.plindia.com/ViewReport.aspx?rpt=1821.
Page 19 9B20M096
ENDNOTES
1
This case was awarded second place in the ISB-Ivey Global Case Competition 2018. The prize was sponsored by ISB.
2
“Indian economic growth slowed down in 2016-17: Arun Jaitley,” Livemint, December 29, 2017, accessed May 20, 2018,
www.livemint.com/Politics/PLCCr7vCrGGAiSU6zDEGSN/Indian-economic-growth-slowed-down-in-201617-Arun-
Jaitley.html.
3
Thyrocare Technologies Limited, Annual Report 2016-17, May 9, 2017, accessed May 30, 2018,
www.thyrocare.com/Assets/documents/Thyrocare Annual Report 2016-17.pdf.
4
Sonia Nicholas, “Product News: Siemens Installs World’s Longest Lab Automation Track at Thyrocare in India,”
SelectScience, September 19, 2014, accessed May 30, 2018, www.selectscience.net/product-news/siemens-installs-worlds-
longest-lab-automation-track-at-thyrocare-in-india/?artID=34230.
5
₹ = INR = Indian rupee. ₹1 = US$0.02 on July 1, 2017; all currency amounts are in ₹ unless specified otherwise;
Shodhganga, “Chapter VIII: Economic Reforms and Health Sector in India,” anonymous thesis, accessed May 30, 2018,
shodhganga.inflibnet.ac.in/bitstream/10603/10223/14/14_chapter%208.pdf.
6
“India 1995,” PopulationPyramid, accessed May 30, 2018, www.populationpyramid.net/india/1995.
7
Imrana Qadeer, “Health Care Systems in Transition III. India, Part I. The Indian Experience,” Journal of Public Health
Medicine 22, no. 1 (October 11, 1999): 25–32, accessed May 30, 2018,
https://pdfs.semanticscholar.org/1ff5/b29efde1a76817b4e092cba1c1a5135a64ae.pdf.
8
Thyrocare Technologies Limited, Draft Red Herring Prospectus, December 30, 2015, accessed May 30, 2018,
www.sebi.gov.in/sebi_data/attachdocs/1451886138156.pdf.
9
Isha Trivedi, “Lack of Regulations Still a Concern for Diagnostic Laboratories Industry,” LiveMint, March 15, 2017, accessed May
30, 2018, www.livemint.com/Politics/VJVWRi9DaVtPJrMdV5IOKP/Lack-of-regulations-still-a-concern-for-diagnostic-laborator.html.
10
Thyrocare Technologies Limited, Draft Red Herring Prospectus, op. cit., Company CEO insights
11
“India's economic growth story remarkable since 1990s, never mind quarterly fluctuations: World Bank,” Financial Express,
March 14, 2018, accessed May 30, 2018, www.financialexpress.com/economy/indias-economic-growth-story-remarkable-
since-1990s-never-mind-quarterly-fluctuations-world-bank/1098628/; Press Trust of India, “Ahead of China, India to remain
fastest growing economy in FY19 & FY20,” ADB, July 19, 2018, accessed May 30, 2018,
https://economictimes.indiatimes.com/news/economy/finance/india-fastest-growing-economy-in-asia-on-track-to-meet-fy18-
target-adb/articleshow/65049353.cms?from=mdr.
12
M. Chakravarty, “India's dismal record in healthcare,” May 23, 2019, accessed May 30, 2018,
www.livemint.com/Opinion/YrcGbLpfbqrWH55xAzehUM/Why-India-ranks-below-Liberia-in-global-healthcare-rankings.html.
13
Surajit Pal, “Thyrocare Technologies: Pathology and Imaging Business Both at Inflexion Point,” Prabhudas Lilladher, November
17, 2016, accessed August 14, 2019, www.dsij.in/productattachment/BrokerRecommendation/ThyrocareTech_BUY_Prabhudas_1
8.11.16.pdf.
14
Team Dr. Lal PathLabs, “Healthcare Industry to Reach $100 Bn by 2017,” Dr. Lal PathLabs, December 6, 2016, accessed
May 30, 2018, www.lalpathlabs.com/blog/healthcare-industry-to-reach-100-bn-by-2017/.
15
Deepak Mallik, Rahul Solanki, and Archana Menon, “Diagnostics: Speed Bumps Ahead; Prefer Hospitals over Diagnostics,”
Edelweiss Securities Limited, April 19, 2017, accessed May 30, 2018, www.edelresearch.com/showreportpdf-
36374/HEALTHCARE_-_DIAGNOSTICS_-_SECTOR_ UPDATE-APR-17-EDEL.
16
Pal, op. cit., Exhibit 3.
17
Surajit Pal, “Thyrocare Technologies: Pathology and Imaging Business Both at Inflexion Point,” op. cit.
18
Mallik, Solanki, and Menon, op. cit.
19
Pal, op. cit.
20
Ibid.
21
Thyrocare Technologies Limited, Draft Red Herring Prospectus, op. cit.
22
Dr. Dhriti Vats “Tests Every Diabetic Patient Must Undergo Every 3 Months,” Healthians, accessed March 3, 2020,
https://blog.healthians.com/tests-every-diabetic-patient-must-undergo-every-3-months.
23
Trivedi, op. cit.
24
National Accreditation Board for Testing and Calibration Laboratories (NABL), “Laboratory Search,” accessed May 30, 2018,
www.nabl-india.org/nabl/index.php?c=search&m=index.
25
26
27
Ibid.
28
Trivedi, op. cit.
29
30
Thyrocare, Annual Report 2016–17, op. cit.
31
32
Ibid.
33
Aparajita Choudhury, “Delhi-Based Healthians Is Trying to Solidify Its Presence in the Online Diagnostics Market,” YourStory
(blog), July 24, 2017, accessed May 30, 2018, https://yourstory.com/2017/07/delhi-based-healthians-trying-solidify-presence-
online-diagnostics-market.
34
Page 20 9B20M096
35
Mohammad Waseem Afasar, “Emerging Trends in Lab and Diagnostic Industry,” Entrepreneur India (blog), October 28,
2017, accessed May 30, 2018, https://www.entrepreneur.com/article/303826.
36
Mallik, Solanki, and Menon, op. cit
37
Ibid.
38
“About Us,” SRL Diagnostics, 2019, accessed May 30, 2018, www.srlworld.com/about/why-srl.
39
Ibid.
40
“About Us,” Dr. Lal PathLabs, 2018, accessed May 30, 2018, www.lalpathlabs.com/about-us.aspx.
41
“Thyrocare Aarogyam1.3,” accessed May 30, 2018, www.diagnosticcentres.in/health-checkup-packages/aarogyam-3.
42
“About Us,” SRL Diagnostics, op cit.; Dr. Lal PathLabs Limited, Annual Report 2016–17, May 12, 2017, accessed May 30,
2018, www.lalpathlabs.com/pdf/annual-report-2016-17.pdf.
43
Thyrocare, Annual Report 2016–17, op. cit.; Thyrocare Technologies Limited, Draft Red Herring Prospectus, op. cit.
44
“About Us,” SRL Diagnostics, op. cit.

Thyrocare Disrupting The Indian Diagnostic Industry

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THYROCARE: DISRUPTING THE INDIAN MEDICAL DIAGNOSTIC

Copyright © 2020, Ivey School of Business Foundation Version: 2020-05-06

THE INDIAN MEDICAL DIAGNOSTIC INDUSTRY

MEDICAL DIAGNOSTIC INDUSTRY: THE TWO DECADES BEFORE 2017

Dr. Lal PathLabs

Thyrocare’s founding philosophy

Thyrocare’s operating model

Procurement of samples involved a completely different set of capabilities in comparison to

LOOKING BEYOND 2017

EXHIBIT 1: INDIAN DIAGNOSTIC INDUSTRY—ORGANIZED AND UNORGANIZED

Companies Market Share

EXHIBIT 2: INDIAN DIAGNOSTIC INDUSTRY—PATHOLOGY AND IMAGING

Diagnostic Type Market Share

EXHIBIT 3: INDIAN DIAGNOSTIC INDUSTRY—PATHOLOGY TESTS BREAKDOWN

Type of Pathology Test Industry Share

EXHIBIT 4: DIAGNOSTIC INDUSTRY VALUE CHAIN

Note: B-2-B = business to business; B-2-C = business to consumer.

EXHIBIT 5: DIAGNOSTIC INDUSTRY, HUB-AND-SPOKE MODEL

EXHIBIT 6: INDIAN DIAGNOSTIC INDUSTRY— INDICATIVE COST STRUCTURE

EXHIBIT 7: COST PER TEST—VOLUME RELATIONSHIP

EXHIBIT 8: MARKET SHARE OF TOP FIVE PAN-INDIA DIAGNOSTIC CHAINS

Company Market Share

EXHIBIT 9: KEY OPERATIONAL HIGHLIGHTS

Parameters Thyrocare Dr. Lal Pathlabs SRL Diagnostics

EXHIBIT 10: PROFIT AND LOSS STATEMENT (IN ₹ MILLION)

Thyrocare Dr. Lal PathLabs SRL Diagnostics

Breakdown of Costs into Key Elements (in ₹ Million)

Thyrocare Dr. Lal PathLabs SRL Diagnostics

EXHIBIT 11: BALANCE SHEET (IN ₹ MILLION)

Thyrocare Dr. Lal PathLabs SRL Diagnostics

Note: ₹ = INR = Indian rupee.

EXHIBIT 12: THYROCARE OPERATIONAL MODEL

EXHIBIT 13: IT INFRASTRUCTURE

The following are some of the salient developments:

EXHIBIT 14: REGIONAL PROCESSING LABORATORIES—CAPACITY UTILIZATION

Regional Processing Laboratories (RPL) Capacity Utilization Utilization (%)

EXHIBIT 15: THYROCARE ORGANIZATIONAL STRUCTURE

General Manager General Manager General Manager Senior IT

Note: CFO = chief financial officer; IT = information technology.

EXHIBIT-16: AUTOMATION TECHNOLOGY COST–VOLUME RELATIONSHIP

Note: RIA = RIA = radioimmunoassay technology; CLIA = chemiluminescence immunoassay technology.

EXHIBIT 17: FINANCIAL PROJECTIONS (IN ₹ MILLION)

Thyrocare Dr. Lal PathLabs SRL Diagnostics

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