Surat firm aims to topple Abbot to become tops tent maker

Surat-based SMT (Sahajanand Medical Technologies), the second player in the Indian market for stents after Abbott Healthcare, hopes to capture the pole position in two to three years.

The company is banking on a randomised clinical study conducted over 1,500 patients in Europe — in which half of the patients used Abbott stents, while the rest used those made by SMT and doctors were not given a break-up — to boost its credibility and reach out to more cardiologists in the Indian market. The results of this study, conducted by a global clinical research organisation, will be out in September. “It will give us the ammunition to reach out to cardiologists who prefer foreign stents,” Sabat said, adding that if things turn out well, SMT aimed to become the top player in two to three years.

The stent maker has already gained market share in India — from 11 per cent about a year ago to 18 per cent now. Abbott is estimated to have a 22-25 per cent share and is the leader for about seven years. This could not be verified with Abbot.

SMT also believes that the price cap on cardiac stents has opened a level playing field and will help them with their goals.

Meanwhile, having raised ~3 billion from PE firms such as Morgan Stanley and Samara Capital, the company is also aiming to be among the top three players in Europe in the next five years. It is planning to set up another stent-making facility in India that will produce a million stents a year (three times the current capacity). SMT plans to use one-third of the funds to meet working capital expenses and for R&D and twothirds to buy a company in Europe.

Sabat said they were looking for a company that had some market presence in Europe and could bring in new technology. “We are debtfree and have been clocking a 40-45 per cent compounded annual growth for four years. We will fund the new facility in India through internal accruals,” he said. The company is scouting for 70-80 acres in Telangana, Uttar Pradesh and near Surat. It has invested close to ~250 million to expand its manufacturing capacity to 500,000 stents per year from 300,000 a year.

Abhishek Kabra, director, Samara Capital, and a director on the board of SMT, said, “What we like about SMT is that it is a technology- focused, professionally-run company. It also has a significant exports business and this de-risks the business from policy uncertainties. Moreover, with the cap on stent prices, it is gaining market share in tier-I cities, which were strongholds of the MNCs.” But things were quite different for the company, which claims to be the first stent manufacturer in Southeast Asia, a few years ago. SMT was a loss-making company — in 2012-13, it posted a loss of ~60 million on a turnover of ~320 million.

In 2012-13, it decided to tweak its business model after realised it was unable to reach out to Tier-II and Tier-III cities through the distributor model. Of the 700 cathlabs in the country in 2013, it was only present in 100. More than 70 per cent of its turnover was coming from Tier-I cities. So, it went for a direct-distribution model to hospitals and clinics, with a quick replacement guarantee.

This helped. SMT is now present in 800 of the 1,200 cathlabs and draws 60 per cent of India revenues from Tier-II and Tier-III cities. It posted a profit of ~20 million on a turnover of ~480 million in 2014. “Many players lost distributors when the NPPA capped trade margins at 8 per cent for stents in February 2017 and their reach declined considerably. But we had already moved to the direct-distribution model,” Sabat said.