A clear vision

Ajay Sharma and Rajat Goel know Rewari well. While Sharma, an eye surgeon, has family roots in this largely agrarian town in Haryana, Goel, an IIM-A graduate, used to make marketing field trips here during his days with Bausch & Lomb and Godrej. But that’s not what makes the duo nostalgic as they step into Eye-Q’s two-storey building on a narrow and busy main road. Back in 2007, the Rewari hospital was literally the test bed to validate their vision for setting up a chain of super-speciality eye hospitals in small towns and cities across North India. 

As with most small towns across the country, Rewari’s existing eye clinics were largely led by single doctors; an optician was attached to some. Goel and Sharma felt their idea — one-stop comprehensive eye care services at affordable price points with benchmarked quality and hygiene standards — had a strong value proposition for any consumer. Along with some angel investors and their personal savings, Sharma and Goel pooled Rs.5 crore to set up the first Eye-Q hospital at Rewari, followed with one in Gurgaon, and then more at Haldwani (Uttarakhand) and Rohtak (Haryana).

The patient who walks into a fully-air conditioned Eye-Q hospital first undergoes a comprehensive check-up before being directed to different eye specialists. Each centre – there are now 15 Eye-Q hospitals across the country – is equipped to handle corrective surgeries in a full-fledged operation theatre, and manned by three doctors and a support staff of 18-20 people. An outpatient typically pays Rs.100 for the check-up, which is waived off for senior citizens in certain centres such as Rewari, or they are offered up to 50% discount. “Generally 20% of our patients are senior citizens,” says Goel. “The discount to them is built into the business model.” 

In the first month itself, the Rewari hospital was handling 80 patients a day against an anticipated number of 40. The Rewari Eye-Q turned cash flow positive in almost nine months. The math works like this: it takes anywhere from Rs.1.5-2.5 crore to set up a 5,000 sq ft Eye-Q centre. If a centre can treat 2,000-odd OPD patients and perform 50-odd cataract operations each month, it definitely can turn cash-flow positive. Each centre takes 18-24 months to become cash-flow positive. Currently 10 of the 15 Eye-Q centres are cash-flow positive, and the remaining five are expected to become so in the current fiscal. “We were confident our idea would work,” recalls Goel. It did. But there was one hitch: Goel found himself battling the rigours of scaling up a small town business model. 

Looking into the distance

Finding doctors to work in small towns was most difficult. “The doctor is the face of any hospital,” says Sharma. “Patients need to see the same face again and again to get into a comfort zone.” However, in some of the centres, Eye-Q found it difficult to retain specialist doctors. In Rewari, the first set of doctors left the centre within the first six months. As a stopgap measure, Sharma and his team of doctors had to travel from Gurgaon every week at least 2-3 times to perform surgeries. “Back in 2007 and 2008, getting the management bandwidth was the biggest challenge we faced,” says Goel. 

Towards end of 2008, the co-founders decided to take a re-look at their business model and froze further expansion plans. What evolved was a hub-and-spoke strategy with one master centre servicing four or five secondary centres within a radius of 250 km. For instance, the Gurgaon Eye-Q acts as a hub for centres in Rohtak, Rewari and Yamunanagar. This structure did not impact capital costs much but it led to better utilisation of human and material resources among the centres. For instance, doctors from Gurgaon would visit Rohtak or Rewari on specific assignments, easing the pressure on the latter. The centres shared expensive medical equipment based on need and avoided duplication of resources. Some of the far-flung centres, such as Ganganagar, were shut down. 

In a further refinement of strategy, more time is devoted to selecting doctors for each centre. Senior surgeons regularly mentor and guide junior doctors for six to eight months before the latter are placed in any centre. As a conscious decision, each centre is usually headed by a locally well-respected doctor, which helped curb attrition levels at the top. A network-wide ERP system is in place.

After setting the house in order, Eye-Q raised funds from a clutch of venture capital investors in 2010 and 2011 to build a war chest for the next round of expansion. The plan is to have 100 centres by the end of 2015, which will require investment of around Rs.150-200 crore. The founders and angel investors have so far pumped Rs.70 crore into the venture. Goel is looking at adding another 15 centres — mostly in north and west India — over the next one year by when total investment would reach Rs.100 crore, he says.

“Investors in this business have to be patient,” says Goel. The numbers bear that out. In FY11, Eye-Q Vision reported net income of Rs.8.81 crore and net loss of Rs.2.14 crore; the numbers for the previous year: a net loss of Rs.70 lakh on a net income of Rs.5.64 crore. Eye-Q turned EBITDA positive in FY12 with a topline of around Rs.25 crore. Goel now expects it to generate net profit in the current fiscal.

“The impact of the business model on the bottomline would be more visible when the chain of hospitals acquires a critical mass in terms of numbers,” says Sanjeev Aggarwal, senior MD, Helion Advisors, one of the investors in Eye-Q. He admits the margin of net profit may be thin over the next two years as Eye-Q goes into an overdrive to reach more tier 2 and 3 cities. “We are in the growth stage,” says Goel. “We are happy being an EBIDTA positive company, generating a small profit at this stage.”      

For sure, Goel knows those small  profits will grow bigger soon enough. Industry estimates say around 120 million Indians need special eye treatment and the bulk of them reside in smaller towns and cities. Sharma and Goel are seeing them at Eye-Q.