How Dr Arvind Lal Diagnosed the Right Mode of Expansion

Today the lab tests more than 50,000 patients a day. It operates 175 labs and 1,600 collection centers.

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By Punita Sabharwal

Entrepreneur India

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Looking at Dr Arvind Lal, Chairman and Managing Director, Dr Lal PathLabs, who worked for 38 years consistently with sheer discipline to build the biggest pathology lab in the country, it's unbelievable that this was not his first career choice.

Quietly sits on one corner of his cabin few miniature models of fighter planes, bringing back the memories of youth. He dreamt of serving the country pursuing a career in the navy or air-force. But, his application was rejected as the fitness test revealed that he had poor eyesight. Arvind, later, went on to set up the biggest diagnostic centre to help million in the country to getting diseases checked and treated before it becomes fatal.

After failing to qualify for the navy or as fighter pilot, Lal pursued a career in medicine and started teaching pathology in Armed Forces Medical College. In 1977, when Lal's father passed away, he took over charges of the pathological lab, which his father had set up two years after independence. Speaking about the choice he made, Dr Lal said, "I don't think we as doctors have a choice; all doctors are entrepreneurs because when you graduate from a medical college you actually start attending patients for a fee."

After partition, Lal's father, S.K Lal, a pathologist by profession, came to the newly minted country India (from Rawalpindi, now a part of Pakistan) and set up a lab in Delhi as Central Clinical Laboratory in 1949. And, about 30 patients visited it every day, Dr Arvind Lal changed it to Dr Lal PathLabs.Soon after joining the lab, Dr Lal launched new testing methods and introduced more test.

Talking about the challenges he faced initially, Lal remembers, "The first challenge was technological. We added an auto analyzer after it was launched in 1982. The first testing for hormone in India in a private lab was done by us in 1981; before that no thyroid test could be done in a private lab."

Today the lab tests more than 50,000 patients a day. It operates 175 labs and 1,600 collection centers. In addition, it picks up samples from another 7,000 medical institutions like Medanta, AIIMS, etc. Last year, the company had one of the best IPOs in the market. Sharing how he organized the business, Lal says, "I have changed everything from subjective and made it absolutely objective. It doesn't matter who came, I gave the same treatment to everybody and stuck to quality."

Diagnosing Franchising

One elderly patient of Dr Lal, who used to live in Model Town, Delhi, had to come for tests to the Hanuman Road Lab in Delhi. He had to visit the lab thrice for a simple sugar test and to collect report and obviously it wasn't a pleasant experience. The man asked Dr Lal, "Why don't you open a lab in my area." That thought led Dr Lal to create collection centers in different parts of the city. From there on, a patient could visit a centre close to his house, give his blood sample, go back to his house eat his breakfast and again in two hours come back and collect his reports. "This is how I introduced franchising for the first time in healthcare in the world," claims Lal.

Since 1980, Dr Lal PathLabs is following the same kind of franchise agreement. Today, more than 95 per cent of the collection centres are franchised. With this, Lal has solved the biggest problem in healthcare, which is accessibility.

At present, Dr Lal PathLabs conducts 700 home visits every day. "I am not physically present everywhere but we make sure anyone from our centre who is facing the patient must provide the same value. The main aim is not to increase difficulty for the patients," Lal adds.

He remembers a widow who could support her children with the income she earned from a franchise unit. "We put a lot of effort to train people in these franchises who are actually taking the blood, the phlebotomist, creating an ecosystem around the collection centres," says Lal.

However, to launch this chain in such a massive pattern, he faced several challenges, which included getting the samples to the main lab, in the initial days. He further devised boxes with frozen gel packs inside them to keep the samples freezed for 24 to 48 hours. This way, the samples could travel up to 30,000 kilometers, even when the atmospheric temperature is 45 degrees, but the temperature inside is between two and eight degrees. When everything was said and done, he came to know that courier services were not allowed to transport blood samples.

Further on, in 1986, he went on to introduce technological advancements in labs so that mechanical work could be done on computers. In 1995, the company moved from being a partnership firm to a private limited enterprise.

As the business expanded, Lal felt the need to hire a CEO. In 2005, Dr. Om Manchanda, who was an IIM Ahmadabad graduate and also a management expert with companies, like Hindustan Unilever and Ranbaxy, joined him. That was one of the initial steps to scale up the business. After raising a hefty amount of debt from banks, it was now time for Dr Lal to look at equity funding.

"In 2005, we had the first private equity funding coming to a private lab in India that was done by West Bridge Capital and they are still on our board. They invested Rs 28 crore in our business and have not
looked back," informs Lal. In 2015, the company went public, becoming one of the most successful one in the market.

The company also took the PPP route with states like Tripura, partnering with the government. "In 2014-2015, we tested 30,000 new born for metabolism tests and other things in Gujarat. There is a lot of scope, ours is like a low hanging fruit, which the government is very well aware of," states Lal.

Technology has really played a very large role in the growth of Dr Lal PathLabs by helping perform tests automatically. Today, it tests 1,000 biopsies on a single day and has the biggest biopsy or histopathology laboratory in the world, and the second highest in the Kidney biopsies. There is only one in India, in private setup, that also has an electron microscope. Lal was the one who introduced vacutainers in India for the first time.

Talking about his vision Lal says, "More and more tests are being done by us and that motivated us to open more and more labs. Our fight was always with ourselves because we were the pioneers and we were the first movers."

Way forward

Internationally, Dr Lal PathLabs are getting samples to be tested right from Kuwait till Malaysia. "From Kuwait, Dubai and Abu Dhabi, and we also got started in Saudi Arabia, Oman and Muscat, SAARC countries like Nepal, Myanmar, Bangladesh, Sri Lanka. Now, we are setting up the labs in Nepal and Bangladesh," states Lal.

Internationally, it has tie-ups with few hospitals, however, in Nepal it has its own collection center. Besides organic growth, the company also took the inorganic growth route. So far, the company has made close to 15 acquisitions. Work is going on full swing in creating a national lab in Kolkata; as it has only one in Delhi right now.

"We felt there is a crying need of opening up a second lab; it is going to be an eight stroyed lab and 90 per cent work has already been completed. It will be opened by 2017 and then we have also acquired a place in Lucknow, to look after Uttar Pradesh because it is a disease prone state and heavily populated." explains Lal.

Currently the margins are between 20- 25 per cent and the company is targeting the turnover of 1,000 crores in financial year 2016-17. Lal has a daughter who is a pathologist and is married to an American and currently settled in USA.

Meanwhile, his son, who is an acknowledged wild life photographer, took the same road walked by his father. Now, as the Assistant Manager he reports to Dr Om Manchanda and he is also the in charge of the veterinary pathology setup in Lal Pathlabs. It's hard, but sometimes you have to choose your family over passion. Only time will tell, whether he is ready to shoulder such a responsibility.

(This article was first published in the January issue of Entrepreneur Magazine. To subscribe, click here)

Punita Sabharwal

Deputy Editor, Entrepreneur India Magazine

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