THE HEADLINES
In a time where the startup ecosystem of India is navigating through a rough tide, comes the euphoric news of Indra IVF securing a multimillion-dollar funding. This ‘Made in India’ IVF and Fertility enterprise is currently valued at 1.1 billion dollars and has become a global phenomenon in their niche segment.
Indra IVF, by securing funding of Rs 5,400 crore from Hong Kong-based Baring Private Equity Asia, has propelled itself to become a global behemoth. While it is highly rejoicing to see an Indian entity soar to great heights, I still feel that several aspects need to be addressed pertaining to the commercialization of such a highly sensitive industry.
FOOD FOR THOUGHT
The major questions that need to be pondered over and debated more in my opinion are:
- Will the hardcore industrialization of a highly delicate social subject such as IVF dilute the overall quality of healthcare?
- Will the Assisted Reproductive Technology Regulations tighten the noose around the mushrooming IVF Centres?
- Will there be any standardization in the benchmarks across all centres to measure the success rates proclaimed?
MAJOR DRIVERS OF SUCCESS FOR INDRA IVF
Indra IVF Hospitals Private Limited (“Indra IVF”), bagged the spotlight after Hong Kong-based Baring Private Equity Asia acquired a 60% stake in Indra IVF for a whopping Rs 5,400 Crores, making it the second biggest deal ever to happen in the world in the IVF segment.
While the success of IVF centres may not be a groundbreaking revelation or commands a widespread news attention, what distinguishes Indra IVF is the unique business model they have adopted.
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HUB AND SPOKE OPERATIONAL MODEL
The success of every enterprise absolutely depends on the quality of people and systems ingrained in the organization. Indra IVF was able to adopt an exemplary format of Hub and Spoke Operational model and saw to it that the rudimentary system was improvised and adhered to during each level of scaling up.
Whenever Indra IVF ventures into a new city, they establish a main center which acts as the hub and multiple ancillary centers that take up the role of the spokes of the wheel. It is at the main centre that the eggs are harvested, fertilized, and developed into embryos. The regular activities such as injections and diagnostic scans are carried out by ancillary centres. Following the success of Indra IVF, many IVF centers have been replicating the same model but none have achieved this scale of success yet.
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CUTTING COSTS IN OPERATIONS
At Indra IVF, the doctors play the dual role of Centre Head and are also reposed with the responsibility of revenue generation as well as seamless execution of operational matters. Though it might be at the risk of transgressing the ethical nerves of many which we will discuss later.
Moreover, each Centre Head is required to make an initial investment, and they are incentivized for the business generated. The advantages to the entity are multifold while embracing this approach.
- The Doctor/Centre head, being a direct stakeholder by being financially invested in the venture, is more likely to ensure the profitability of the unit.
- The Doctor/Centre head has to ensure the Key Result Areas [KRAs] are properly met to ensure the receipt of their incentives.
- Initial Capital outlay is shared between the Centre head and Indra IVF, thus making it an asset-light model for the latter.
By taking advantage of the aforementioned competitive edges, the initial investor of Indra IVF – TA Associates, was able to walk home with a handsome fourfold return on their investment.
ETHICAL CONSIDERATIONS
While pondering over the previously mentioned point of incentivizing the Doctors, it seriously puts forth a question as to whether this action amounts to a breach of morality and ethical conduct. Although vehemently denied, there may be situations where medical practitioners find themselves at a crossroads, having to make a difficult decision between prioritizing the profitability of the enterprise and adhering to the virtuous path.
One of the reasons for the flurry of interest of Private Equity firms in the IVF sector is due to the scalability and the revenue generation capability of this established business model. Though it is a high-value segment, the trend seen now is placing more reliance on technology rather than the expertise of specialists by the big players. Nevertheless, the discounting of the expertise of qualified practitioners to technology will never be beneficial in the long term.
It is a no-brainer that once an entity is funded by stakeholders other than the initial promoters, the accountability rises profoundly. There will be two options available to ramp up the returns: either by increasing the profitability of existing units or by acquiring new clients/customers. It’s imperative for regulators to establish strict checks and balances to ensure that ethical lines are never diluted.
Another matter to be addressed is the murky success rates projected by IVF Centers that are cloaked in opacity. In India, many IVF centers trumpet their monumental success rates based on the presence of the pregnancy hormone hCG, even though from there to live birth, success rates drop considerably.
With the advent and enforcement of the Assisted Reproductive Technology (Regulation) Act, 2021, we can be really hopeful of enhanced regulatory control and heightened accountability among all stakeholders. Initiatives such as the publishing of the National ART & Surrogacy Registry and arresting of unchecked practices such as limiting the proportion of donor cycles looks promising and when implemented, would be the right steps from a regulatory point of view.
ON A CONCLUDING NOTE
There are many chances for a highly sensitive segment to spiral out of control and act like Dr. Jekyll from the Strange Case of Dr Jekyll and Mr. Hyde. Although the attraction of private equity to a niche segment like IVF has many positive aspects, it is crucial to implement careful consideration and regulations to monitor the activities of funded IVF centers. It is high time to remove the stigma around IVF by ushering in positive steps.
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