Indian Ayurvedic industry was valued at ~ 8 bn USD in 2022. It is gaining momentum on the back of government focus on building a healthy a fit India. Ayurveda is an alternative medicine system with historical roots in India and is gaining global prominence for its preventive healthcare properties and treatment of many chronic lifestyle orders.
While Ayurveda has been in existence since ages, it has not gained as much awareness as it deserves due to lack of clinical trials , investment and high fragmentation of the market with plethora of standalone clinics and wellness centres. That said, there have been early signs of uptick in the sector especially after the government set up Ministry of Ayush in November 2014 to promote Ayurvedic services and products.
Vaidya Sane (Madhav Baug) offers a lucrative opportunity to engage in the growth of this sector across the value chain, spanning from services to products. The company, led by Dr. Rohit Sane, aims to organize the industry by establishing a network of clinics and hospitals, while enhancing clinical outcomes through a distinctive blend of diagnostic testing and Ayurvedic services, along with its proprietary products.
About the company
Started in 2006 with its 1st cardiac hospital in Khopoli and 1 clinic in Dombivali, Madhav Baug has expanded to more than 300 clinics and 2 hospitals with 60 beds as of FY 23. The company serves its outpatients through an extensive network of clinics across 8 states, and it caters to IPD + OPD through 2 hospitals located in Khopoli and Kondhali. The company achieved a revenue of 100 cr in FY 23 vs 75 cr in FY 22 with EBITDA margin of ~ 8%.
Out of the total revenue of 100 cr, hospitals accounted for 30% of the revenue, while clinics accounted for the remaining amount. The company focuses on innovative reversal therapies for conditions such as heart disease, diabetes, blood pressure, and obesity management. I won’t elaborate on India being recognized as the diabetes or chronic heart disease capital of the world, as this is well known. Needless to say, this translates into a large opportunity for the company.
Through years of intensive research, Vaidya Sane launched standardized diet kits for each disease in 2016. This unique delivery approach was a game-changer for the company, as it ensured easier medical compliance by providing patients with pre-packaged daily food kits required to adhere to the treatment.
The company asserts the high efficacy of its treatments, supported by the publication of numerous trials and studies in highly reputable global journals, which serves as a testament to their quality. In 2017, they released a randomized controlled trial in the Indian Heart Journal, the official publication of the Cardiological Society of India. Subsequently, they have published additional reports in esteemed journals such as The Lancet, World Health Foundation, European Journal of Biomedical and Pharmaceutical Sciences, Asian Journal of Cardiology Research, and the International Journal of Diabetes and Endocrinology.
This approach stands as a solid foundation to enhance credibility surrounding their treatments and to raise awareness through clinical trials. For those who are interested, the provided link can be accessed to learn more
The company operates under two distinct models: company-owned and franchise-owned. As of FY 23, it had a total of 302 clinics, with 196 of them being operated as franchises. The company initiates the process by establishing clinics on its own and subsequently, based on the doctors’ performance, these clinics are offered to potential franchisees for a fee. While the company generates revenue primarily through the sale of products, the service-related revenue is attributed to the franchise owners. This dynamic results in the reported revenue from clinics being 70 crore rupees, whereas the actual cumulative collection at the enterprise level amounts to 153 crore rupees.
The economics are strong: – Cost of setting up a clinic is 20-25 lakh, The monthly operating cost is 2 lakh. A clinic reaches maturity over 2 years on average where it reports ~6-8 lakhs a month. GM is 70%.
The company has opened a lot of clinics over the past couple of years which are yet to reach maturity and hence, one can expect operating leverage as the clinics scale. This is reflected in the average revenue per clinic which is still below 50 lakhs per annum.
The company has 45 beds in khopoli and 20 in Kondhall. It uses advanced diagnostics and stringent plan for patients here for treatment along with Panchakarma therapy. The Khopoli hospital is NABH accredited and the company has tied up with 30 insurance companies through TPA.
One of the few companies trying to organize a growing industry. Acceptance requires credibility and the company is working towards it through research papers , word of mouth and significant investment in marketing – digital and on ground through exhibitions , trade shows etc. The company spent 16% of reported revenue on marketing in FY 23. Despite such investment and clinics yet to hit maturity, the company reported ~ 25% ROCE in FY 23
Investment in technology, marketing, unique and innovative delivery through diet kits and amalgamating diagnostic tech with ayurveda despite its small size reflects the DNA of the management. The company has a doctor facing app to monitor the progress of the patients and consumer facing app for medical assistance, health and exercise monitoring, medicine support etc. The app has more than 100k downloads. It even has a clinic management app for inventory management at the clinic level.
The company has ambitions to increase number of clinics to ~500 by FY 25. They would open about 80 clinics in FY 24 in focus states like Kolkata, Punjab, Delhi and Rajasthan. The company is also expanding its number of hospital beds to 120 which would entail 7-8 cr of capex. The company has ~16 cr of cash on its books and has recently raised 40 cr through warrants from marquee investors like Mukul Aggarwal, Sundar Iyer – more than sufficient cash available for expansion over the next many years.
The company is launching new products like Madhavprash, gummies, herbal teas and juices, atta etc. Vaidya Sane has acquired 2 companies last year to enter manufacturing of these products (Dynamic remedies and UV Ayurgen Pharma). It sells these products online and is exploring opportunities to expedite offline distribution channels through acquisition. One can see and buy the list of products on Buy Health & beauty Products Online | Online Shopping | Live Life Well | Madhavbaug Wellness. They have recently started selling their products on Amazon , 1mg etc.
The company is exploring NABH accreditation for its clinics too which could be a big game changer. Apart from this the company is partnering with corporates like JSW Ispat, Central Warehousing corporation etc to provide services to members/employees of such organizations at discounted pricing. They are also trying to convince corporate insurers for coverage of these services in their insurance policies.
Margin drivers – Operating leverage – scale (16% marketing , 20% expensed on salary in FY 23) and maturity of clinics and in house manufacturing of products through 2 acquisitions made in FY 23 (Dynamic Remedies and UV Ayurgen). Expect the EBITDA to increase to double digits over the next three years with 25% growth in topline.
- Whatever said and done, most people still have more faith in allopathy vs ayurveda. Increasing awareness will take time and requires substantial investments. Govt support and promotion will help immensely in this aspect
- The company has more than 220 clinics in Maharashtra with thin presence in other states. It needs to be seen if the company can replicate this success in other states as well. Even marketing seems to be more focused and regional (Maharashtra) for now and this needs to change. Quality of marketing (atleast on YouTube) needs improvement
- Building offline distribution will be critical for its retail products to do well. The company could look at an acquisition here
- While a lot of things can play out, execution remains key and requires strong talent at the top. Needs to be seen how the company fares on this.
DISCLAIMER - INVESTED AND BIASED