MedPlus banking on franchises

Drawing up ambitious plans for expansion, Hyderabad-based pharmacy retail chain MedPlus is expecting the franchise format alone will contribute 50 per cent of its total revenue next year.

The second largest pharmacy retail chain in the country has a network of 1,350 pharmacies in several states.

Taking the brand to rural areas, MedPlus announced plans to open 1,100 franchise stores in 1,100 mandals of Telangana and Andhra Pradesh by the end of this year. It is also working on a proposal to open 500 franchise stores each in Tamil Nadu and Karnataka.

"We expect to receive 30 per cent of our revenue in the current year from franchise stores. This will go up to 50 per cent next year and will keep increasing thereafter," said Madhukar Gangadi, founder and CEO, MedPlus Health Solutions.

A couple of years ago, the company announced a target of setting up of 10,000 outlets by 2018-19. Gangadi insists MedPlus will keep adding its own stores as well.

According Gangadi, there is demand for franchise stores among local entrepreneurs and the company wants to tap this potential. He believes the franchise model makes sense because the company cannot run stores in remote rural areas.

"They earn from day one as we tell them what to stock. The company extends them existing discount and loyalty programmes," he said. The franchise stores can also access MedPlus' online platform to order products.

Organised retail pharmacies are a minuscule portion of an estimated Rs 80,000-crore pharmaceutical market in India. The Apollo Group's pharmacy chain is the largest organised player with a network of 2,350 own stores. Revenues of Apollo pharmacy stores, excluding in-house hospital demand, stood at Rs 2,500 crore in 2015-16, according to a company executive.

"By March 2017 we will become the largest retail pharmacy chain in the country," said Gangadi, a doctor with an MBA from Wharton. MedPlus earned Rs 1,720 crore income in 2015-16.

The company has tied up with the State Bank of India for providing loans to the franchisees with 50 per cent collateral.

An industry insider said MedPlus' experiment with franchise stores had not met success in Gujarat in the past.

Private equity firms hold close to a 70 per cent stake in MedPlus and the remaining stake is held by Madhukar and a few others.