Last month, NephroPlus—India’s largest network of dialysis centres—ended a three-year hunt. Having scoured nations across Asia, it finally settled on its first overseas expansion. The 11-year-old company announced that it had bought a 51% stake in a Philippines-based dialysis care chain, Royal Care Dialysis Centers Inc (RCDC).

Founded by Sunil Chellani, an Indian-origin healthcare entrepreneur, eight-year-old RCDC has six standalone dialysis centres scattered across the Metropolitan Manila area—the national capital region of the Philippines. Over the next five years, says Vikram Vuppala, NephroPlus plans to initially invest US$15-20 million in the partnership. “We will acquire another 24% in RCDC over the next five years,” claims Vuppala, who is one-third of the entrepreneurial trio that set up NephroPlus, and serves as its CEO.

With countries like Japan, Taiwan, Indonesia, and Brunei offering almost 100% government coverage of dialysis costs, and the prevalence of chronic kidney disease fluctuating between 10-18% in Asian countries, the Philippine is just the beginning. “We want to be the first pan-regional chain,” Vuppala says candidly. The company has earmarked its Series D round—a US$45 million fundraise in November 2019—for expansion, Vuppala adds.

In the Philippines, says Vuppala, he found the “right” local partner in Chellani. But other than the RCDC owner’s on-ground support and established networks, the Philippines is a robust starting point for the Indian firm. While the Philippine dialysis industry is one-tenth the size of the Indian market, kidney diseases—especially end-stage renal disease (ESRD)—are among the leading causes of death among the country’s 105 million population.

In the last two decades, PhilHealth, the Philippines’ government-run healthcare insurance scheme, also started covering out-patient dialysis. From initially covering 45 sessions annually, it now covers 90 sessions a year. This unlocked the potential for private healthcare providers to set up independent, free-standing dialysis centres.

“We were sure we wanted to expand to countries where there is sufficient government coverage. Paying for dialysis, out-of-pocket, is onerous.”

-- Vikram Vuppala, NephroPlus co-founder and CEO

The rub, however, lies not in the size of the market, but what the market is willing to pay for dialysis. The cost per session in the Philippines lies in the range of Php 2,600-5,000 (US$54-103)—way more than what Indian patients pay. Working at the world’s lowest price point—US$20—in India, says Vuppala, has taught NephroPlus to keep its operational costs low while scaling centres.

According to business intelligence platform Tofler, in the financial year ending 31 March 2019, NephroPlus earned a total revenue of Rs 46 crore (US$6.1 million), up from Rs 40 crore in the previous year. Its net loss stood at Rs 17 crore (US$2.2 million), down from Rs 21 crore (US$2.8 million) during the preceding year. Vuppala claims that at a corporate EBITDA level, NephroPlus is already profitable in India. (We’ve written written The Ken How NephroPlus became India’s largest dialysis chain Read more about NephroPlus before.)

“The dialysis business in India is both competitive and restrictive.