Thyrocare Technologies Limited

THYROCARE TECHNOLOGIES LIMITED

Company Report: India-Healthcare-Unlisted 1 OCTOBER 2015

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COMPANY BACKGROUND

Beginning

Thyrocare Technologies Limited claims to be India’s most advanced totally automated laboratory having its strong presence in more than 2000 cities / towns in India and internationally.

The company was started in 1996, by Dr Velumani Arokiaswamy with a staff of 4 people, with focus on Thyroid testing. Initially, it did not do anything beyond Radioimmunoassays.

By 2014, it has become India’s most profitable diagnostic business. The company has a highly differentiated business model. It is more of a B2B company, collecting samples from hundreds of dedicated collection points, and also from allied labs. All processing is done in one highly automated lab near Mumbai.

In recent years, the company has tried new models for growth, setting up labs for new kind of tests within India, and also venturing abroad. Some of these new initiatives are B2B as well as B2C, and don’t follow a centralized model.

Promoters

The company was started in 1996, by Dr Velumani Arokiaswamy. The management now hold about 60%, rest is with external investors.

CX Partners holds about 27% in the company while Norwest Venture Partners owns 10% equity stake.

CX had acquired 30 per cent stake in Thyrocare in 2010 for Rs 188 crore, at a valuation of Rs 626 crore. In 2013, it sold a three per cent stake to ICICI Bank for about Rs 40 crore.

Board of Directors Name Designation

Velumani Arokiaswamy CMD

Amruta Velumani Director

Sumathi Velumani Naidu Director

Ajay Relan Investor Director

Vivek Chhacchi Investor Director

Gopal Shivram Hedge Independent Director

Vishwas Kulkarni Independent Director

Sundararaju Aarogiasamy Naidu Whole Time Director

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Address

D - 37/1, Ttc Industrial Area M I D C, Turbhe Navi Mumbai, Maharashtra-400703 91-022-27622762

Financial Summary

Year ending Mar 31 FY12 FY13 FY14

Net Sales (Rs mn) 1,091 1,343 1,500

EBITDA (Rs mn) 491 637 692

EBITDA Margin (%) 45% 47% 46%

PAT (Rs mn) 350 566 458

Net worth (Rs mn) 1,032 1,606 2,063

Debt (Rs mn) 306 318 315

Sales Growth (%) 40.4% 23.1% 11.7%

PAT Growth (%) 34.1% 61.7% -19.1%

ROE (%) 40.8% 42.9% 25.0%

ROCE (%) 45.6% 47.8% 32.0%

D/E (x) 0.30 0.20 0.15

Auditor BSR & Co

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India-Healtcare-Unlisted Thyrocare 1 Oct’15

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Norwest had bought its 10% stake in 2012 for Rs 120 crore. BUSINESS HIGHLIGHTS

Thyrocare Technologies has followed a model of a central laboratory in Navi Mumbai which tests samples being couriered from its 600 collection partners—which are smaller laboratories—across the country. It's a B2B model as Thyrocare services laboratory partners rather than consumers directly. Lab Nation will now directly target consumers.

Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai - India for esoteric tests; and Regional Processing Laboratory in major metro cities of India and other parts of Asia. It has strong focus on technology, brands and systems – to allow service delivery at an affordable cost.

Thyrocare claims to be the first Indian laboratory to have an IT enabled, 24x7, fully automated diagnostic laboratory. Its lab, set up covering over 2,00,000 sq. ft. floor space, can process over 40,000 specimens and over 2,00,000 Clinical Chemistry investigations per night. The speed factor is achieved through a combination of air-cargo logistics and IT enabled, barcoded, bi-directional systems that ensures a turnaround time of 4 to 8 hours for processing of samples that arrive at any time of the day or night.

Thyrocare has a highly differentiated model, as shown by:

Unique concept - Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai - India for esoteric tests; and Regional Processing Laboratory in major metro cities of India and other parts of Asia.

Unique focus - Its focuses on clinical chemistry and preventive care diagnosis.

Unique air-cargo logistics - which ensure the samples reach its laboratory every night, same night, before midnight.

Unique operations - Its laboratory works 24 x 7 to cater to the needs of the customers.

India's First and World's longest - Total Laboratory Automation (Siemens).

India's First preanalytical barcoded vial sorter (MUT) and Sample Sorter (Roche).

Thyrocare is lately trying new models.

Lab Nation

It came up with a key lab network called Lab Nation in 2014. It is also countrywide B2B initiative in the laboratory diagnostic industry to facilitate individual laboratories to build their brands. Lab Nation will have the ability to charge higher for some of the tests as it will undertake all tests. Over time, Lab Nation will also foray into diagnostics related to liver, kidney and infertility.

Thyrocare reportedly intended to invest Rs 500 crore in this business. The company had targets to open 10 centres in 2014-15; 50 by 2015-16 and 300 by 2016-17. Each lab will have an investment of Rs 10 crore and will have 50 people. The technology used at Lab Nation will be the same as that of Thyrocare. The idea is to have uniformity even if it comes with a different brand.

Nueclear Healthcare

Nueclear Healthcare Ltd is the low-cost cancer diagnosis services business. It is planning to set up 120 molecular imaging centres for the low-cost cancer diagnosis services. The company raised Rs 22 crore ($4 million) from Norwest Venture Partners.

Vifi

Another brand is Vifi Laboratories, which are focused on clinical chemistry. Using laboratories in all major towns, it offers quality services from back end at affordable costs for laboratories. This is purely B2B.

Thyrocare has also gone out of India. It is now in more than a dozen countries now and is moving towards becoming largest preventive care laboratory in Bahrain which caters to 10 countries and Bangladesh.

Vnationwide networked, IT empowered laboratory, MANUFACTURING FACILITIES

Thyrocare’s Central Processing Laboratory, situated in Navi Mumbai, is a state-of-art, fully automated diagnostic laboratory equipped with the most advanced instrumentation from leading international brands. With a minimum but highly qualified workforce, the laboratory is driven by barcoded and bi-directionally interfaced system and an intelligent laboratory information system (LIS).



The Centralized Processing Laboratory consists of 120,000 sq. ft of track automation system that has a capacity to process over 50,000 samples in a day. Thyrocare today boasts of processing 3 billion investigations in a year and having a capacity to process 10 billion in a year.

Laboratory functions 24X7. Air cargo functions 24 X 7 and 95% of the business is air cargo driven. Barcoded, Bi-directionally interfaced and webserver solutions enhances the speed and allows every laboratory in any continent to operate its machines as if they are present in their floor and generate results and reports within 5 hours of flight touching the runway.

Through air-cargo, more than 25,000 samples from all parts of India are brought to CPL. This is made possible by a strong logistics network of Thyrocare whose well-coordinated efforts ensure that the samples reach the CPL every night, same night, before mid-night. These are meticulously collected, collated, checked for sample integrity, temperature and other aspects of Pre-analytical Quality Control and then stored appropriately.

IT helps in seamless integration of all the processes, work orders are downloaded from the web server, barcodes are scanned and specimens are arranged accordingly for processing. More than 25,000 different samples are processed every night and the reports are directly uploaded back in the website for our customer to see.

FINANCIAL PERFORMANCE

Thyrocare was the fourth largest diagnostic lab business in India in 2014. However, going by EBITDA margins, it was the most profitable.

The company has grown at a CAGR of 24% over the 3 year period FY11-14. This is the below the industry leader Dr Lal Pathlabs, but comparable or better than others.

Due to its strong profitability, and around Rs 220 crore of external funding raised from PE funds, Thyrocare is

a zero debt company. Besides, as per FY14 Balance Sheet, the company had Rs 100 crore in current investments, or effectively cash.

FUNDING AND FUTURE PLANS

In Feb’15, it was reported that Thyrocare was planning a stock market listing by the end of June that could raise around $85 million to $100 million. Even in 2014, the company was planning an IPO, but could not accomplish it due to poor market conditions.

Thyrocare has raised money at aggressive valuations in the past. In FY12, when Norwest invested, it appears the valuation was Rs 1200 crore. For the IPO, valuation being talked about area above Rs 2000 crore.

Dr Velumani has been quoting as saying the IPO will be mainly to give an exit to investors. However, there may be a need for fresh funds as well, given the strong investment plans of the company.



FINANCIAL DETAILS

P&L

(Rs M) FY11 FY12 FY13 FY14

Net Sales 777.0 1,091.0 1,343.0 1,500.0

RM 240.0 287.0 356.0 426.0

Power&F 8.0 21.0 19.0 26.0

Salary 54.0 69.0 89.0 117.0

Other OPC 27.0 85.0 109.0 38.0

G&A - - - -

Sales&D 76.0 132.0 131.0 198.0

Misc 2.0 2.0 2.0 3.0

Total Exp 401.0 599.0 706.0 808.0

PBDIT 375.0 491.0 637.0 692.0

Other Inc 32.0 55.0 177.0 59.0

Int 1.0 1.0 1.0 2.0

Dep 14.0 21.0 33.0 64.0

PBT 393.0 524.0 779.0 686.0

PAT 261.0 350.0 566.0 458.0

Balance Sheet

(Rs M) FY11 FY12 FY13 FY14

Equity 108 108 109 109

Networth 682 1,032 1,606 2,063

Total Debt 285 306 318 315

Total Liabilities 967 1,338 1,924 2,378

Gross Block 233 286 871 1,058

Less: Accumulated Depreciation 71 89 121 184

Net Block 162 197 750 874

Total Fixed Assets 162 197 750 874

Investments 289 276 825 1,244

Current Assets, Loans & Advances

Inventories 40 51 52 63

Sundry Debtors (Debotrs) 28 24 17 49

Cash and Bank 400 590 175 119

Other Current Assets 11 4 7 3

Loans and Advances 78 218 16 40

Total Current Assets 557 887 267 274

Less : Current Liabilities and Provisions

Current Liabilities 40 13 12 66



Provisions 3 9 10 3

Total Current Liabilities 43 22 22 69

Net Current Assets 514 865 245 205

Miscellaneous 2.0 - 104.0 55.0

Total Assets 967.0 1,338.0 1,924.0 2,378.0

Ratios

FY11 FY12 FY13 FY14

Growth (%) Sales

40.4% 23.1% 11.7%

PBDIT

30.9% 29.7% 8.6%

PBT

33.3% 48.7% -11.9%

PAT

34.1% 61.7% -19.1%

Margins (%) PBDIT 48.3% 45.0% 47.4% 46.1%

PAT 33.6% 32.1% 42.1% 30.5%

Capital Efficiency (%) ROE

40.8% 42.9% 25.0%

ROCE

45.6% 47.8% 32.0%

Leverage D/E (x) 0.42 0.30 0.20 0.15

Debt/Ebitda 0.76 0.62 0.50 0.46

Working Capital (days) Inventory t/o 31.1 23.9 15.5 24.6

Debtors t/o 10.8 8.7 5.6 8.0

Payable t/o 77.6 33.7 12.8 33.4

WC Cycle -35.7 -1.1 8.2 -0.8



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