Naresh Malhotra plans to replicate Coffee Day success in clinics space

Naresh Malhotra plans to replicate Coffee Day success in clinics space

Last Updated: Wed, Oct 10, 2012 19:26 hrs

As chief executive of Cafe Coffee Day, Naresh Malhotra oversaw the expansion of the chain during its formative years and was a key person behind the force it is today. After a gap of a few years, during which Malhotra was actively involved with global venture capital firm Sequoia Capital in India, he is back with a venture that would test his skills to the hilt.

Malhotra plans to fast expand his new venture, Modern Family Doctor (MFD), a chain of neighbourhood clinics and pharmacies. For this, Malhotra says he is in talks with two well-known private equity (PE) funds for fresh funding of $15-20 million. Last year, he had raised seed funding of $2 million from the PE arm of US-based Silicon Valley Bank. In the last 15 months, he has managed to steadily raise the number of clinics to 20. Most of these are located at Bangalore and Pune.

With the framework of clinics and their operations already tested, Malhotra is set to increase the number of clinics to 100 by March 2013, and to 300 in the next phase of three years. On an average, a clinic, coupled with a pharmacy, costs Rs 20 lakh.

Malhotra is considering using the next round of funding to increase scale. To a large extent, this would follow Cafe Coffee Day’s aggressive roll-out model. With him as chief executive, Cafe Coffee Day had raised PE funding from Sequoia Capital, Deutsche Group, Darby Private Equity and International Finance Corporation.

However, unlike the period when the Cafe Coffee Day chain was being expanded, this time he would face stiff competition. “During that time, we created the market but now we have to focus on market displacement. We are tapping social media to the hilt and are tying up with a slew of corporate houses to spread the message,” Malhotra said.

He is also tapping the non-resident India (NRI) market with a service that would enable the health of their relatives in India to be taken care of, for an annual fee of $500. “On a monthly basis, our doctors would visit the relatives, carry out a complete check-up and send the report back to the NRI concerned. This is just one of the innovations we are adopting,” he added.

Malhotra would compete against corporate healthcare groups like Apollo Hospitals (which is looking to expand its chain of neighbourhood clinics), Nationwide, etc.

“There is indeed a lot of competition, but we have managed to keep our costs tight; I feel that is where we have the edge. In addition, there is a vast gap between supply and demand in the Indian healthcare system, where chains such as ours can make a difference,” he said.

Ash Lilani, president of Silicon Valley Bank India, which led the first round of funding into MFD, said, “The healthcare sector in India shows enormous promise. The current spend is about 4.5 per cent of GDP (gross domestic product) and all indications point to a three-fold increase over the next few years. We are delighted to be the partner of choice for MFD in its venture and look forward to participating in its growth plans.”

A few months earlier, another healthcare chain, NationWide Primary Healthcare, had raised Rs 25 crore from Norwest Venture Partners.

NationWide estimates India’s primary healthcare market at $40 billion and expects this to exceed $200 billion in 10 years. As is the case with MFD, it hopes to ride this growth.

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