Tata 1mg Expects Profits By Year-end, Focussing On Institutional Deals For Growth: CTO, Gaurav Agarwal

The telemedicine segment became a part of essential services during the Covid 19 pandemic with e-pharmacy, teleconsultation and home diagnostic services gaining significant ground owing to the unending demand of people who were stuck in homes. The high demand led by the pandemic has phased out with firms in the telemedicine space now actively trying to diversify into new services to maximise revenues. 

The e-pharmacy segment in particular has been the favourite child of the healthtech sector along with the e-diagnostics in terms of receiving funding and demand from the consumers. While the e-pharmacy space has seen the most traction from consumers and industry alike, the regulatory challenges and clear opposition from the country's retail pharmacists have been one of the few high tides that the segment has faced over the last few years. 

BW Healthcare World spoke to Gaurav Agarwal, Co-founder and Chief Technology Officer, Tata 1mg about some of these challenges along with the company's future plans for growth and new services that it is looking to offer. 

Backed by 27 institutional investors with a total funding raised of USD 231 million, Tata 1mg is one of the leading players among its competitors, according to Tracxn, a platform that tracks startups and private companies.  The company is backed by Corisol Holding, HBM Healthcare Investments, IFC and Bill & Melinda Gates Foundation among other investors. 

According to the business intelligence platform Tofler, the company recorded a revenue of Rs 1,627 crore in the financial year 2023 and a net loss of Rs 1,259 crore which included a one-off expense of around Rs 668 crores.

Edited Excerpts

What are the challenges and opportunities that the e-pharmacies sector is going through? What are your views on the regulatory challenges that the space has been seeing?

We should look at the challenges in the overall ecosystem across industries for any new business that comes up and in that sense, I won't say that the challenges are any different. The regulatory environment has been very supportive, especially because the government and most of the policymakers are able to see the benefits that online delivery of medicines brings to consumers. 

One big change that's taking shape especially due to constrained capital, a lot of the dramatic growth has gone away. Covid brought a lot of free growth to the market as people were at home, they couldn't really go out and get medicines. I think some of that slowed down. That said the number of people on our platforms is growing. A lot of what's gone away is the high discounting that we were seeing in like a flush capital in 2021, post-COVID phase, we were seeing a lot of capital, come into the market which has gone away now. 

From a 1mg standpoint, it has brought a lot of rationality where consumers are starting to discover services for their value. From a challenge perspective, we don't see it as an enormous challenge we are growing as a platform. Profitability continues to remain a challenge for us. But we are getting very close to becoming profitable.

Speaking of the regulatory environment, there has been some back and forth between the industry and the regulator. There were show cause notices being issued to firms in the recent past but we have not heard of any resolution after that. Have you got any updates on that front?

I think that's been going on for a while. Some of it is also just awareness of the model.  The show cause notice, for instance, was issued from a long-old court case, which essentially ensured that the government made sure that players were operating in accordance with the Drugs and Cosmetics Act. This meant that when medicines were being dispensed, those places had licenses. 1mg or other legitimate pharmacy players, they're all being operated with full licenses and compliance. But in terms of a dialogue from the government, there has been no update and there has been no significant regulatory challenge recently.

How far do you think that road to profitability is? What are the new initiatives that you are taking towards going there? 

Internally, we have a goal for the business to become profitable by the end of this financial year and we've been working on it for the last few quarters, we are actually very close. 

So the way 1mg is organised is that we have six profit and loss lines (P&L centres). Out of the six four are profitable and they actually turn in money every month. A couple including one large and one small business is actually unprofitable today. 

Some initiatives that we are doing include rationalising discounts, our competitors too have become rational. In addition, I believe there's a lot of focus on selection, service and quality of the service. We are now saying to customers that when you come to 1mg, you may have to pay a higher price, but what you get is better quality and service in return. 

What is your view on the criticism that has been thrown at the e-pharmacy sector that duplicate medicines are being sold online? 

That actually doesn't exist at all, because compared to any other distribution channel, when you buy medicines on Tata 1mg there's absolute authenticity. Our whole supply chain is direct with manufacturers. We don't buy anything from the open market. Everything is tracked and traced very religiously to the extent that we have batch numbers, we have bills, and we have invoices. 

In fact, even when we talk to customers, one of the big reasons why consumers come online, especially to a brand like Tata 1mg is because they feel that they get authentic medicines, because of our brand, and because of the supply chains that we run.

Do you think quick delivery of medicines just as groceries is something which will happen in the space?

Today people are asking when I can get a packet of chips in 15-20 minutes, why can't I get my medicines in 15-20 minutes? And even though the large majority of users we serve are chronic patients who can actually plan and order their medicines, still people want to avoid planning. So our focus today is ensuring that consumers get medicines in 30-45 minutes and we are running some pilots around this.

E-pharmacies firms are also actively remodelling and diversifying into more services. Any new services that 1mg’s is planning?

E-pharmacy is our largest business but the way we look at healthcare is that anything that a patient needs at home, medicines, diagnostics, tests, consultations, ambulance services, home care,  sooner or later we will provide all those services either directly or in partnership with other providers.

1mg started in 2015, we only had e-pharmacy, right before 2015 ended we added a diagnostic service. And before 2016 ended, we had consultations as well. Today we are the largest integrated healthcare platform in this country. 

Our focus now is on how we can take 1mg’s core capabilities such as supply chain, medicine delivery, and diagnostic tests to new channels of care. We are doing a lot of work with insurance firms and corporates in building insurance wellness plans and corporate wellness plans. So the companies offering health and wellness plans will be powered by 1mg. We are setting up occupational health centres. Our focus is less on net new services, but more on how we take these services and package them together, hence we are focusing more on institutional partnerships. 

We are also partnering with new players to bring in additional services. So we are doing an ambulance partnership, a condition care partnership and also working on an obesity plan internally at 1mg, so lots of new services.