QMS Medical Allied Services traces its journey from a B2B distributor to a player in diagnostics and patient support services, with a focus on early detection and adherence programs. With acquisitions like Saathi Healthcare and expansion into AI-based diagnostics, the company is targeting revenue growth over the next three years.
Sheryll D’Souza: Hi and welcome to SmallCap Spotlight. I’m Sheryll D’Souza and today with me I have a very niche company who is into medical device manufacturing. We are joined by Mr. Mahesh Makhija who is the MD and Chairman at QMS Medical Alliance Services.
Thank you so much for joining us on Small Cap Spotlight and it’s very interesting the fact that you are into medical device equipment. So I wanted to understand first and foremost about QMS, how did it come into being?
Mahesh Makhija: Okay, first we are into part manufacturing right now, I mean maybe third party manufacturing not on our own actually 100%. QMS was incorporated in 1994 actually, you know when I was working with an Indian pharma company.
I guess to give you a brief background, I started my career with medical equipments and consumable company moved towards the Indian pharma company. So what I learned in these two companies was the ideas which they are there for the promotion that we are using and what the products which we could have used for medical technical purpose. I could start a new business on that actually.
So that was the main concept behind that and it was based on the international pharma ethical code of conduct like products which are used by the doctors on the patients are supposed to be good promotional products. So based on these two ideas, the incorporation of QMS marketing started actually in 1994. So we started as basically dealers with 3M actually, that was the first company that we took up the dealership.
Slowly, slowly we grew. Even the pharma healthcare space actually those days a lot, I mean even then a lot of brand promotion activities used to but nobody used to give a medical product as a brand activity actually technically speaking. So we are the first people who actually started this concept actually and till a long time, I mean very few people actually understood what we are doing.
Even now very few people understand what we are doing to tell you honestly. So based on this, we went on you know developing a lot of inroads in the industry. We first were doing with 3M, then came with Heinz, then with Kimberly Clark, BPL, Tynor, you name it the medical companies everybody wanted to work with us because we used to give them the outputs which no other industry can give that.
We used to give them the direct approach to the doctors to the pharma actually. So that’s how the network started actually. Till 2017, we were only doing this.
Our larger objective obviously was to be the only people in the industry whether the pharma marketing requires in the form of science or for the products or services, we should be the only people to give them. That’s how based on that concept, the QMS was built right now. So like you mentioned, you all started as a product vertical.
Sheryll D’Souza: Now you all are moving into services. How has that transition been and what led to that transition now?
Mahesh Makhija: That’s exactly what I told. So there was a scope for what else does the pharma team does actually whether in the form of lectures, whether in the form of patient programs or what.
So we wanted to be that the people to provide them also since we had the network actually already. So we developed this type of verticals also and based on the guidelines which the government was also putting in on the industry. So it was a natural fix actually for us to move into this segment actually.
That’s how it worked out.
Sheryll D’Souza: So talking about your business now, if you could help us understand from where do you get major chunk of your revenue and what contributes maximum to it and also if you could help us understand the breakup of your verticals.
Mahesh Makhija: See, breakup of the verticals is we closed in almost around 156 crores last year actually.
Out of that the product division was almost 110 odd crores and the balance was from the services. 46 crores were from services. That includes the turnover from Saathi which we have gone ahead and acquired actually right now around 51% is that.
So from that, that’s how it worked out.
Cheryl D’Souza: Talking about your acquisition, I wanted to talk about Saathi Healthcare that you’ve acquired. If you could help us understand what’s the rationale behind that acquisition and also how is it helping, how the synergy is actually combining.
Mahesh Makhija: See, since we were a medical diagnostic company, medical technology company, we started a vertical for the camps. Now what do we do in camps basically? We identify, we do conduct camps in the doctor’s clinic with early detections of lot of other diseases are there. So we help manage these diseases actually.
So you know like tests like ABPM, tests like BMD, tests like diabetic retinopathy which normally a patient would have to go outside to do that. Here we are doing it in the doctor’s clinic only. We have almost more than 120 people across different countries, 5000 pin codes which we cover and we have you know, we’ve invested a lot of money among the equipments actually also and all these equipments are all CDSO approved, USFD approved equipments actually and these tests actually help the doctor to diagnose the patient in the early stages of a lot of diseases.
Now with Saathi, what happens is like, what do you do after diagnosis? Generally, there is a 60 percent loss in the industry actually, in a prescription loss in the sense what you call it like after the first month, you don’t find the patient coming back to the treatment actually. There’s a trend which is there. So this patient service program basically help in maintaining the patient on this program, adhering to the you know, the adhering a proper discipline on maintaining their you know, lifestyle, maintaining, taking proper medication.
So all these programs basically, Saathi was a pioneer in this from 16 years back and if you look at this like Saathi, the main division, the main company which Saathi was focusing on all the multinational because all the patient purpose programs were actually done by the multinationals. Globally, if you see right now, the PSP is the patient adhering patient support program is a 70.4 billion industry globally. It’s that big globally.
In India, you know, technically speaking, we know it’s an open landscape at this moment. You don’t have and you can’t put in a tag actually, technically a farmer spends anything around three to five percent on their ANP actually. So it’s within that space but patient service programs come into a lot of you know, a lot of money is put in from a lot of other resources also from that.
So with Saathi what happened, it helped us to complete this loop actually. So completing in the loop is like we do our camps, we diagnose the patients. If there is a company which is opting for a patient service program with Saathi’s experience and all, we could make those programs, execute them and help them retain the patient.
That’s complete.
Cheryl D’Souza: So which means that this gives you a huge scope of scalability as well in an arena which is untapped operation.
Mahesh Makhija: Absolutely untapped arena.
People have been hearing and doing about patient service programs here and there but never having it being done so aggressively right now because of the certain guidelines that have been coming into the account, changes done by in the UCMP guidelines also. As I told you before, these patient service programs are primarily done by the multinationals, hardly being done by the Indian companies before. Even if it had been done, it would have been done just to tick the boxes.
Actually, yes, these are the ones we are doing. That’s it. But never so aggressively.
We’ve been doing one of the largest programs actually is Amrai of which is handled by us right now. We are like a human stream actually and it’s catering to more than one lakh patients right now.
Cheryl D’Souza: So it’s a huge arena that you’ve actually tapped, an untapped arena for you which means that it actually opens a huge landscape for your company.
I want to understand actually about your approach to product distribution. Recently, I believe you have Kapil Dev as a brand ambassador.
Mahesh Makhija: We’ve been using Kapil sir basically for a lot of stuff in the sense actually we’ve used him in our programs, Amrai programs also.
We used him in the brand promotions also. QDevice is a product which we launched on our own actually. So that’s where you use Kapil sir actually.
See, post-Covid, during Covid also and what happened is a lot of imports were happening from China. So we tied up with the IIT, Patek. We got certain products developed by them.
They also helped us in quality of these products and we went ahead and marketing those products under our own brand names. So obviously, we required a good decent brand ambassador for that. So we had Kapil sir also for that actually.
And then we used him in a lot of products. We used him in our service campaigns. We used him in the product samples, multiple things actually.
For a year time, we had used him even in Amrai also. He was our brand ambassador for Amrai also for a period of one year for that time. And the product distribution, see basically we are more focusing on a core strength which is the B2B platform.
B2B platform is where we know what we can do. That’s our strength area. So we’ve been selling our products more on the B2B channel.
Again, it reaches to the doctors. Now with Dr. Diti coming into the picture and Taneh being there along as a guide and tour, they are going on the online platforms. We’re doing QDevices on the online platform also.
These are the two channels which we are using right now for the distribution actually. We have started a hospital distribution channel but QDevices as a product, we have not entered into that thing. The hospital distribution channel is purely based on a normal distribution curve of the established brands.
We have not put in QDevices into that segment yet. QDevices is only going through the B2B and the online channels.
Cheryl D’Souza: You roughly spoke about the COVID era and when we were into the COVID era and post-COVID era, we’ve seen a huge demand especially for healthcare and diagnostics.
Have you seen a sizable jump and that jump sustaining the growth sort of being sustained or have you seen some sort of a shift in the way of people’s behavior?
Mahesh Makhija: Yes, we’ve been doing a lot of point-of-care products, health diagnostic products in our system right now. In the product category itself also, it almost contributes almost around 25% of our business actually in the product category, health diagnostics. We have been tying up with a lot of AI-based companies right now and the latest was the smart QR actually where direct hemoglobin test and the vitamin D test, the first time in this country is happening without any instrument.
It’s based on some photosynthetic support. You click the photo on the camera and you get the readings actually done. It’s the first time it’s happened right now.
A lot of AI products are coming in right now and diagnostics is yes. Post-Corona time, a lot of rapid tests have been developed. We took it as from a point of view in a CAMS business also, what happens most importantly is like the patient as I said normally doesn’t come back so easily.
So here when you’re doing a test actually for the patient and you tell him that you come back and collect the report next day, 60 to 80% of the patients don’t come back. With these rapid tests what happens?
Yes, you are the doctor is able to give treatment. So that’s what it works.
So yes, what you’re saying is right, rapid test is growing. The lab diagnostic field is growing and it’s an important arena for us also.
Cheryl D’Souza: Apart from the fact that you had an acquisition of Sarthi Healthcare, I believe also you had Prometheus Healthcare as well. If you could help us understand more about that.
Mahesh Makhija: Prometheus was a part of Saathi, so it came along with us.
Cheryl D’Souza: So the synergies are very much aligned, same synergies coming in for your company and also talking about the hospital business, that’s relatively new, that’s what you’ve entered into.So how is it different? How is it helping your vision?
Mahesh Makhija: See hospital is now the idea is to develop an all India network actually of distribution channel right now. So we have companies like I mean, we are dealers for bigger companies like SMT, 3M, Heinz, all these are big. Anyway, we are their dealers for the promo business, for the B2B business.
So it was but natural extension for us to take that and with the online platform also that we are developing. So we are opening up our offices in multiple places like Bangalore, Chennai, not offices in a sense, we’ll have warehouses and a drug license already in place for that, where Indore is there, Ahmedabad is there, 9 different states that are Chennai is there, 9 different places which we are opening up our office at this moment. So it helps us to complete the distribution loop because it’s just an extension for us.
We are already into this business model through the B2B channel. Now we are going through this model to the hospital channel. Though this is the traditional model, what we were doing was a much different niche type of an extension because the products used to go through the doctors directly.
Here, you know, it’s there, it’s a traditional channel which is there. So we’re just completing the loop at this moment.
Cheryl D’Souza: Right. What’s your M&A strategy then given the fact, are you looking at some more M&A?
Mahesh Makhija: No, I’m not at this moment. Honestly speaking, I have one to complete with Sathi at this moment. And then, yes, a lot of things are there in pipeline, but as and when it unfolds, we’ll let you know.
First phase is to complete Sathi, get it merged with QMS, I mean merged in a sense, let the synergy of working together happen for one and a half year at least, and then start. But I always believe in one thing, learn to crawl, walk, then run. Simple.
Cheryl D’Souza: And then talking about run, what sort of a run rate have you thought about for the company going ahead given the fact that you are on a healthy footing when you talk about your balance sheet at this point in time?
Mahesh Makhija: Balance sheet is yes, good, no doubt about it. In the three years time, we are looking at almost doubling our turnovers right now. That’s the numbers that we are looking at actually.
And I know it’s there, we’re looking at a good EBITDA, good health, you know, profitability, because the patient service and the CAMS model are a little bit different type of profit margins games actually. So we are looking at scaling up that in a much, much larger way. The product and business is a traditional business which keeps on growing around 10 to 15%.
But a larger growth area is obviously going to come from the patient service and the CAMS model. That’s the larger area growth. So in three years, the vision is doubling up the turnovers right now at this moment.
That’s been first step vision actually.
Cheryl D’Souza: So doubling the turnover in three years. But you know, one cannot dispute about the fact that how the competition also is increasing, right? Are you facing that? And what sets you apart from the competition?
Mahesh Makhija: See, you know, the segment that we are into actually, we’ve been here in this for 31 years.
Right. Okay. Second, there are in the, if I look at everything, there are entry barriers in every field actually.
Though entry barriers, the people who come with deep pockets can only survive in this industry, otherwise they cannot. And it’s obviously the pricing strategy, the thing which has been there from everybody, the easiest thing for any competition is to come and to enter the market, lower the price and do that. But then over a period of time, we have seen 31 years, people have come and gone.
We’ve been here, we’ve been there steady. So pricing is, lowering the pricing has never been an worry actually for us actually. And we have been selling all high branded value products only.
Service is what keeps us going. That is an area which we always focus on, service. That you need to give the service to your clients.
Cheryl D’Souza: So that would be your big motive.
Mahesh Makhija: That’s the big motive. Right.
Quality products, quality service, that’s more important. That is it. Right.
Cheryl D’Souza: Have you ever come across the China competition? Have you faced and do you feel that sort of a heat?
Mahesh Makhija: See, you cannot deny that everybody in this country imports from China, whether in the knockdown conditions, security conditions and then, you know, a direct import of that. See, only thing is with the government regulations now being a little bit more stricter actually with the CDOs coming in. So at least, you know, for sure, some quality products only are being allowed to import.
You don’t have any, you know, inferior quality products being imported actually from there. And yes, India manufacturing scale is there a lot of, I mean, we are also trying to take in from a lot of, as I told you, the adiabatic guys we’ve been talking, there are three, two, three other guys who have helped these people to sell their products into that. But you cannot deny that fact that yes, China is there.
I mean, always will be there.
Cheryl D’Souza: That’s true. But you did speak about your products, they go through quality tests, right? So if you could help us understand what sort of quality tests do your products undergo? What sort of regulatory hurdles that you’ve actually spoken about? What should one keep in mind while analyzing this sort of an industry as a whole?
Mahesh Makhija: See, from the quality product point of view, I think that entire team should be taking an interview of the entire team to do that because see, I will only ask the team to give me a complete product to sell.
Yes, the license formalities, the CDSOs, if it’s an CEO required or an FDA required and all those things are there that the team takes care of that. I personally, honestly would not be the right person to answer this.
Cheryl D’Souza: If you could help us understand now, you did say about the next three years, your aim is to double, right? What about the little bit longer term view about five to seven years? Where do you see, how do you see yourself expanding? Are you also looking at global expansion?
Mahesh Makhija: We are definitely looking up at global expansions because a lot of patient service programs and a lot of the CAMS model is internationally being done already.
So we will definitely start looking into that space. But probably by another year’s time, once we are set up ready with this company to set up right now. So that we are going to do that.
I will not deny that. I have kept an eye on that. But the Indian market itself is so big at this moment right now.
And I mean, to tell you honestly, it’s untapped. Yes, it’s absolutely untapped. As a consumer myself, I think I would also believe that very truly that it is pretty untapped.
Like the way you said also that patients don’t come back after their initial diagnosis. So that’s also one of the concerns. That’s the thing.
60% of the patients drop out and it’s a data. It’s not what I am talking about. It’s a data.
It’s 60% of the patients in the chronic therapy drop out after the first month of medicine. They do not come back. And chronic therapy, if you talk about it’s almost more than 50-60,000 closed business in India.
So technically speaking, 60% of the patients also drop out. That means a huge loss of business.
Cheryl D’Souza: So people who are watching us, you did speak about how QMS came into being, your product lines, the way how your acquisition is helping you reach out untapped market.
But what is this one thing that you would want the investors to actually know about QMS? And there’s something that they all should ideally focus on when you are actually gauging the company. And it’s actually a predominance in this medical equipment industry.
Mahesh Makhija: You know, it’s a company with the heart and soul.
It’s built with that. It’s a company with heart and soul, honestly speaking. We have our employees who are there with us for a longer time.
And, you know, we believe, as I told you, 31 years in the industry, we believe in service, we believe in good quality to people, we maintain good relationships. We don’t fudge our data. So that’s something I can very clearly tell you.
Even when we are down in the numbers, we are the first people to go out and say that, yes, this is there. Even right now, also being on the SME platform, though we are supposed to give our results once in six months, but we’ve been giving results once every quarter. That’s, you know, that’s the type of transparency we would like to keep and continue.
And just, you know, have faith in us. We are here for a longer run, not for a short run. That’s all.
Cheryl D’Souza: Yeah. And who in your management team, just to understand, given the fact that you’ve been in this industry for the last 30 years and in excess of about 30 years, and you’re here for the long haul as well. So your management team, who would you say will now take the legacy forward, the vision forward?
Mahesh Makhija: Oh, there’s a long time to give that right now.
But there is a full set of team of people who are being groomed at this moment right now in each team segment, actually, in the hospital chain, in the patient service program, in the CAMS model. It’s the youngsters who are driving the business right now out here at this moment. Because innovation is key.
Yeah, innovation is key. The idea is to keep the company as professional as what it is right now. So there are people being groomed for that.
I don’t want to pinpoint anybody at this moment, but there are a set of people who are being groomed for that.
Cheryl D’Souza: All right. Keeping in mind your vision to grow and to double in the next two years, and as well as, you know, given the fact that you’re here for the long haul, Mr. Makeja, I wish you and the entire team at QMS Medical Allied Services the very best.
And thank you so much for joining us on this special edition of SmallCap Spotlight.
Mahesh Makhija: Thank you for having me. Thank you.