Since it was founded in 1996, Indian diagnostics company Thyrocare has mostly enjoyed smooth sailing. By bringing down the cost for the most popular test for thyroid, it established itself as a serious player in the preventive healthcare space. This happened on the back of Thyrocare’s unique model—nationwide reach, but with just one lab. Samples collected throughout the length and breadth of the country were flown in to its central, automated lab for analysis.

It was a well thought out business plan—high economies of scale for one lab meant lower costs, higher margins, and, in turn, lower prices for customers. It worked wonders for the company. In 2016, Thyrocare became only the second standalone diagnostics lab to go public, after Dr Lal Path Labs, which had over 150 labs spread across the country in 2016.

But 2016 marked more than just the year of Thyrocare’s listing. It was the year that A Velumani—Thryocare’s founder, chairman, MD and CEO—decided that it was time to get closer to the patient by changing tack and building more labs. Velumani promised 25 labs by March 2018, heralding the start of big things. But two years on from that promise, Thyrocare is caught in a conundrum.

Only eight labs have been established in addition to its central lab as the company has stalled on its original vision. While the company had revenues of Rs 355.4 crore ($47.32 million) in FY18, Thyrocare’s reluctance to build more labs is on account of things not panning out the way the company had hoped. “I could build 25 labs in one year. One regional lab costs about Rs 3 crore ($423,738). Once you establish it, expenditure goes up but not revenue because there isn’t enough business. When we put labs closer to the patient in the region, we had thought more growth will happen,” says Velumani, explaining the situation.

This lack of growth is on account of forces beyond the control of Velumani and Thyrocare. In its Q3 FY18 analyst call, Thyrocare’s management had said that while the diagnostics industry grew at about 15%, the number of competitors grew at about 25%. More competition has meant less growth. From FY15 onwards, Thyrocare has seen a consistent decrease in its compound annual growth rate (CAGR). Between FY15 and FY16, this was 30.61%. This has dropped to just 11.53% between FY17 and FY18.  

In addition to the bevvy of competitors, the new labs also offered people more than what Thyrocare did. While the latter stuck to its single-minded focus on preventive care, newer labs offered both preventive as well as sick care. Preventive care only makes up 7% of the $4 billion diagnostics market, unlike the global trend, where preventive care accounts for around 60% of the entire market.


Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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