RG Stone Urology and Laparoscopy eyes Rs 100 crore PE funds

It is estimated that some 15 to 18 per cent of the Indian population has kidney or gall bladder stones. Around 7 million are actively suffering from the problems associated with them. Thus, curing this affliction presents a huge business opportunity.

Take Hanish Bansal, Executive Director, RG Stone Urology & Laparoscopy, a single-specialty hospital chain. Bansal took over the family business in 1998 when it was a fairly small chain with one hospital each in Delhi, Mumbai and Chennai. "The moment I graduated, I got married and was forced to take charge of the company," he says.

By that time, RG Stone had started witnessing demand from the north India region. "We were getting calls from several north Indian cities inquiring about our services. Since urology is a niche area, patients were willing to travel rather than getting treated at local hospitals," says Bansal. In 2005, RG Stone opened another hospital in Delhi and since then, there's been expansion across the length and breadth of the country.

Today, RG Stone claims to be the largest single-specialty hospital chain (in India) with 16 hospitals across three different models -- owned, partnering with urologists running hospitals and setting up and operating urology department in other large private hospitals such as AMRI and Kothari Medical Centre (in Kolkata), and Hira Mongi Navneet Hospital (in Mumbai).

Many large hospitals don't have urology departments, they focus on cardiology, orthopedic or oncology. RG Stone takes over their urology department, install equipment, place our manpower there and run the department. The second model is still new with only one hospital in Dehradun under such arrangement. "We will do more JVs going forward with urologists who are running their own hospitals. We are currently in touch with three more such urologists. With these three models, we plan to have 35 hospitals in the next five years."

In the recent years, healthcare sector has witnessed tremendous growth.  Bansal says that there's a lot of news about single-specialty hospitals coming up but coincidentally there are not many brands in that space. At 16 hospitals, RG Stone is still smaller than many single-specialty chains. But Bansal has an answer. He says that as opposed to other single-specialty chains, the capital required to open one urology hospital is much higher. "We need a complete infrastructure to start a hospital. There's also a huge shortage of urologist in India. In India, total practicing urologists are 1500."

Also, he adds, that single-specialty chains (such as Vasan Eye Care, Centre For Sight, MyDentist, Eye-Q) are more involved in OPD (outpatient department) kind of work. "We are a proper surgical hospital with the single specialty. In my case, OPD procedures are 4-5 per cent while 95 per cent of the patients stay for at least one day. In the case of eye and dental care chains, they have 95 per cent OPD treatments," says Bansal.

Starting with breaking kidney stones without surgery, over the past few years, RG Stone has added new sub-specialties within urology and laparoscopy treatments including female urology, bariatric surgery and laparoscopic gynaecology, among others. It offers laser treatments, minimal invasive surgeries and pure non-invasive procedures.

When Bansal decided to expand in 2005, he took a lot of debt but later realized that raising private equity capital could speed up growth. In 2009, he raised some Rs 41 crore from ICICI Venture, which was headed by Renuka Ramnath at that time. He bought back the stake from ICICI Venture in 2011 and raised fresh growth capital from India Equity Partners the same year.

With the help of private equity investors, RG Stone, which runs up to 60-bedded hospitals, has been able to bring in professionalism in the company. It hired Avinash Ojha, the former head of GE Healthcare in India.

RG Stone is again planning to raise around Rs 100 crore of PE money to fund its future expansion. "We are currently in talks with some 10 investors," he adds.

In the last financial year, the company recorded revenues of Rs 110 crore. Since the company is adding new hospitals, its margins stood at 14 per cent. "While the margins are low in new hospitals, old hospitals are doing 24 per cent (EBITDA) margins. On a consolidated basis, we are looking at close to 18 per cent margins this year. In five years from now, we will not be less than Rs 500 crore in revenues," says Bansal.