Krsnaa Diagnostics Bets On Franchise Centres To Cut Costs Of Retail Foray

Krsnaa Diagnostics Ltd., which offers pathology and radiology services to hospitals, will also directly serve consumers even as competition intensifies in the market.

The Pune-headquartered company intends to open 600 franchise centres across India to offer services to consumers at the least possible cost, according to its Sept. 28 announcement.

It will enter the retail segment in two phases. In phase I, the company will cover Maharashtra, Himachal Pradesh, Punjab; and in phase II, West Bengal and Rajasthan, spreading across metros, tier 2, and tier 3 cities, the company said.

"Considering the rising demand for diagnostics services and to cater to the remotest parts of the country, we have decided to enter deep markets through a franchise model," Pallavi Jain, managing director of Krsnaa Diagnostics, was quoted in the company's exchange filing.

India's diagnostic market is turning crowded as multiple new entrants bank on higher healthcare spending after the pandemic. While online pharmacies and drugmakers are foraying into the segment, existing pathology laboratory chains, too, are expanding footprint.

Krsnaa is among the largest providers of radiology and diagnostic services under a single roof in India, with a presence in 16 states and two union territories. The new centers will be equipped to offer specialised services in precision medicine, genetics, genomics, and molecular diagnostics, along with the routine investigations of biochemistry and serology, which are commonly used in routine diagnostics tests, the filing stated.

"We shall also be providing radiology services at our centres with the help of tele-radiology, selecting our franchise partners in such a way so as to provide both pathology and radiology services under one roof to the patients," Jain told BQ Prime.

The contribution of radiology and pathology services to revenues is 60:40, Jain said. She expects the ratio to be 50:50 post-expansion.

The company is focusing on a franchise model so that the outlay is contained within 3% of the company's annual budget, Chief Operating Officer Ravinder Sethi told BQ Prime. "The expansion will be asset-light and will ensure better utilisation of our existing laboratory capacities."

The company had a cash and bank balance of Rs 348 crore as on March 31, 2022.

The marketing expenditure, which lies at the core of the expansion plans, is expected to be managed by its profit-sharing franchise model.

No additional testing facilities or laboratories would be required to be set up, Sethi said, as the installed capacity would be sufficient to take on the retail business load. “While most of our peers' centres don't operate 24 x7, ours are operational 24 x7 and hence this model will allow us to optimise the utilization of our existing capacity, leverage the franchisees as well as ensure patients can even provide samples during late evening," he said.

The company is known for its disruptive pricing by charging up to 60% lower than peers, and the distribution model is so effectively designed that it improves productivity and efficiency. "There will be no negative impact on costs and margins," he said.

“Currently, we operate most of our centers through hospitals," Sethi said in the filing. "This initiative is set to bolster and accelerate our footprint in India and improve healthcare access for patients."