Sweet Tooth

Vikram Vora has a pretty simple way of deciding if he wants to open a clinic in a particular area or not: he just looks around for the nearest ICICI Bank ATM or Café Coffee Day outlet. “It is a good indicator of how densely populated a place is. So far, this strategy has worked very well for us,” says the founder and CEO of MyDentist, a chain of dental clinics that has 80 outlets across Mumbai, Pune and Surat. That strategy seems to have worked, with MyDentist needing to shut down just one clinic since it set up shop in 2011. A first-generation entrepreneur, Vora set up MyDentist with his younger brother, Parth, the director and CFO. Within their first fiscal, the brothers had touched 13 clinics, adding 26 to the tally the following year.

 “We have a conservative approach to business and hence our expansion process has been gradual,” says Vora, whose company had a topline of ₹25 crore for FY13. It is quite clear that Vora is not a man in a hurry. His product offering — an affordable chain of dental clinics — is very massy and he speaks candidly of counting even autorickshaw drivers among its customers. “Our customers don’t walk in expecting us to help improve their smile. Their needs are extremely curative in nature,” says Vora, whose green T-shirt rather appropriately reads ‘smile more, pay less’. The immediate task at hand for Vora is to get to 150 clinics in the current fiscal and to 250 by the end of FY16. These are still bit figures, given that there are barely 220 clinics between the top four players in India, and the total size of the dental care services market, according to the Indian Dental Association, is currently just $1.16 billion, up from $660 million in 2009. Contrast this with the fact that India has just 1.8 lakh dentists for a population of 1.2 billion and the market potential becomes quite clear.

 Teething trouble

Vora has been quite busy of late, what with MyDentist having opened five clinics over the last two months in Surat. This was preceded by 13 clinics in Pune. “We can practically open a clinic anywhere in today’s date, be it Guwahati or Kanyakumari,” the 34-year-old says with a smile. Clearly, the brothers have got a hang of what it takes to make a clinic work, though the learning has not come easy, as Vora readily admits. 

Like most successful startup stories, this, too, featured an element of chance. Anand Lunia, former executive director and CFO, Seedfund, and Vora’s former boss at Lionbridge, in 2010 asked the latter to come up with a business plan. Once Vora, an engineer and MBA grad with a stint at ICICI Bank, set up what was then known as Total Dental Care with a total of five clinics, Lunia pointed out that scalability w

as key in the success of his venture. “My targets were modest. I told him we would like to open 30 clinics in three years and needed ₹70 lakh for the same,” grins Vora. In July that year, Seedfund agreed to incubate Vora’s dental business.

Securing the initial investment of ₹1 crore was just the beginning of the story. For Vora, turning entrepreneur was something he had been planning for a long time, though very little time was spent thinking about aspects such as branding. “A very significant contribution from Seedfund was to suggest a change in the name and colour of our brand identity,” says Vora. Various names, including My Tooth Fairy, were considered, before the brothers zeroed in on MyDentist against a green background. “Frankly, my awareness of a crucial aspect such as branding was quite poor,” says Vora. There was another thing to be understood — such businesses take time to stabilise. “I had to get rid of my Gujju mindset that attached a stigma to loss,” he laughs, reminding us that the business took off on just ₹6 lakh in family savings. 

Today, MyDentist remains in the red as it is still in expansion mode. “Ours is a compact format, where each clinic is only 350 square feet, with a capex of ₹30 lakh. Most of this is invested in equipment and furniture, while the running costs include staff salaries, rent and electricity,” says Parth. A new clinic typically sees 50 customers per month during its first two months of operation. “Once the business matures, the number of visits goes up to about 10-15 treatments per day,” he explains. That is quite evident at the outlet at Vile Parle, in suburban Mumbai, MyDentist’s first clinic, which features a modest waiting area and two dentists. On a Tuesday afternoon, one customer is already undergoing treatment, while another has just walked in. “We break even at a revenue of around ₹3.5 lakh per clinic per month,” explains Parth. Today, MyDentist employs 600 dentists, with their average age being less than 30. 

Given their small-sized operations, players such as MyDentist have managed to proliferate quite easily, though that is not necessarily the norm in the industry. Take the case of Alliance Dental care, a joint venture between Apollo Hospitals and Trivitron Healthcare, which operates under the Apollo White Dental brand and caters to a premium clientele. Today, the chain operates 50 clinics across 13 cities. It has three formats: dental spas, clinics and hospital implants. The minimum time taken to break even is 5-6 months, with the spas, which cover an area of at least 3,500 square feet, taking as much as 15-18 months. The company’s CEO, VS Venkatesh, says the big change in the business is that people are coming in not just for illness dentistry. “It is more about wellness today, with an aesthetic and cosmetic angle involved,” he points out. Over the next two years, Alliance Dental is looking to be a 450-clinic chain.

Interestingly, most chains, barring Alliance Dental, have chosen to stick to a certain region and this move is backed by sound logic. Amarinder Singh, CEO, Star Dental India, the owners of the Clove Dental clinics, which have a presence in Delhi and the NCR, points out that it is easier to have high quality standards this way. “Besides, it leads to economies of scale, which help us in driving costs down. Much of this is possible only when you have a multiple-location model in one region,” he explains. According to Singh, the savings are in form of technology and fees paid to the doctor, among other costs. “It is precisely for this reason that dental clinics in India like the idea of being concentrated in one geography,” he adds.

 Getting ambitious

The transition to a more organised format is what has tickled people like Vora. By just being affordable, his firm has managed to reach out to over two lakh patients, of those 1.3 lakh during the last fiscal alone. In terms of revenue, he says MyDentist has doubled revenues every year for the last two years. “We should continue at this growth rate for at least the next two years,” adds Vora.

Of course, this kind of growth has impressed Seedfund a great deal. “From our point of view, we are very comfortable with an enterprise that has a large addressable clientele. It should not be restricted to just a base of high-paying customers,” says Pravin Gandhi, founding partner, Seedfund. If MyDentist used exactly that approach, the opportunity was very obvious in the minds of the investor. “Indians do not really value dental treatment. For a player to succeed in this business, he must make the service not just affordable but also very accessible,” emphasises Gandhi.

Seedfund had a straightforward way of looking at the business model. Gandhi says the objective for each clinic is to achieve operational break-even in three to six months and deliver a return on investment in about two years. That is something that Vora has been able to achieve in Mumbai and even more easily in Surat, where it has achieved break-even in just two months. There, each outlet is at least 800 square feet, which means MyDentist can install more chairs and treat more people. That’s not all. “People come in for root canal treatment, which is more expensive. We have noticed that people spend a lot more in a place like Surat, which was a bit of a revelation,” he says.

The rub in the business is that it is just plain unpredictable. Vora is candid when he says that customers will come calling only when they are in agony. “This is typically after they have tried clove oil and popped in a few Brufen tablets,” he says with a wry smile. Given that the average person is meant to visit a dentist at least once in six months, the reality is that most Indians have been to a dentist barely on a couple of occasions in their lifetime. “In this scenario, making a business forecast is quite a challenge,” admits Vora.

Gandhi is aware of this peculiarity in the business. “Yes, it is an area of concern and not something that one can wish away. However, the trick is that by being accessible, you are creating a habit in the minds of the patient, increasing the number of visits,” he maintains. MyDentist has also attempted to use the analytics route to address this challenge. “Through this, it is somewhat possible to predict the future based on what has taken place in the past,” he adds.

Much of this will bank on MyDentist’s ability to bring in more people to the clinic, and a big incentive towards that end is the price. Vora insists that he charges barely half of the going rate in the business, ensuring that his model is massy in nature. A basic cleaning per sitting at MyDentist costs #300, while the cheapest root canal treatment is ₹2,500, compared with ₹600 and ₹4,000, respectively, at a larger clinic. Again, the cheapest orthodontic treatment costs ₹21,000 at MyDentist, while it is almost impossible to pull it off at anything less than ₹30,000 elsewhere. That apart, MyDentist also offers a flexible payment option to its patients.

Amit Sachdeva, director and promoter, Axiss Dental, agrees that there is a pyramid structure for dentists in India, with the top practitioners occupying the top part of it. “The upper middle class is the one that is our audience and that occupies the top 15% percentile of the population,” he says. Axiss Dental is the largest in the business, with revenues in excess of ₹30 crore and a chain of 65 clinics across NCR, Punjab and Bengaluru. Its presence in the south was the result of Axiss buying out Narayana Hrudayalaya Dental Clinic. Sachdeva is clear that healthcare services cannot flourish at lower costs. “Quality does come at a cost,” he says quite firmly.

Moving from the mom-and-pop scenario to running a chain is something that even smaller players have done. Take the case of Denty’s, a chain owned by Hyderabad-based Today’s Healthcare India, with a five-clinic operation in five cities across Andhra Pradesh and Tamil Nadu. In the case of the former, it has a presence in tier 2 and 3 cities like Vijayawada and Kakinada. In May this year, Denty’s attracted a ₹27-crore fund infusion from Helion Venture Partners, an early- to mid-stage India-focused venture fund. 

Being in a smaller market brings some serious advantages to the table. “It is possible to be very big in a small market. In time, it gives the player a disproportionate share of the market,” points out Ritesh Banglani, director, Helion. He says that Denty’s caters to the mid-market segment, which remains a huge market opportunity. “Of course, big cities have a lot of potential. But tier 2 and 3 cities form the periphery strategy for a player like Denty’s,” points out Banglani, whose fund has had other investments in healthcare such as EyeQ, a specialty eye hospital chain, and LifeCell, a stem cell bank. On the issue of the transition to a more organised structure in the dental clinic business, Banglani says there is a serious factor at work here. “Chains can attract specialists who can work across clinics. More importantly, these chains can invest in high-end equipment, which is not such an easy decision for mom-and-pop establishments,” he adds.

A more organised structure in the dental care market is not unique to India. Ajay Kumar Vij, co-founder and CEO, Asian Healthcare Fund, a growth-stage healthcare-focused private equity fund that invested ₹40 crore in MyDentist last April, calls this the corporatisation of dental practice. According to him, the US has several clinic chains such as Aspen Dentals and Great Expression Dentals, while the UK too has Southern Dental and IDG. 

“The challenges of running a single practice clinic and the advantages that organised play delivers will ensure long-term growth for organised dental chains,” says Vij. He says there were a couple of key areas that drew his fund to MyDentist. “It is a relatively low capex-intensive business and offers a model that is highly scalable. That apart, the focus on the large and relatively unaddressed mass market made us very comfortable,” he says. That’s pretty much Vora’s way of looking at the market as well. Going mass is what he has done and done well so far.