Medical marvel

A manufacturer of medical devices and components, located just down the street from Infosys Technologies, is turning out to be a surprise star in the current slowdown. Opto Circuits, a 19-year old company founded by Vinod Ramnani, a mechanical engineer, and his American business partner Thomas Dieteker, has defied the withering effects of a slowdown to post a strong 65.7 pert cent increase in net revenues and a 47.2 per cent improvement in profits in the third quarter. “The healthcare industry is recession-proof,” says Ramnani.

Opto derives 75 per cent of its revenues from non-invasive products such as patient monitoring systems and sensors used to monitor patient metrics such as heartbeat, 22 per cent from invasive products such as stents used in heart surgeries and catheters, and the rest from vending its technology and software. “The market for our products globally is around $14-15 billion across the first two categories and the US is the biggest market in healthcare,” says CFO Bodapati Bhaskar. While the firm sells its components to large healthcare equipment makers, it is beginning to increasingly compete with them with its own range of monitoring equipment. “We want to focus on small hospitals and nursing homes,” says Ramnani.

Why Opto Circuits is a winner Graduated from making components for large medical equipment makers to making its own patient-monitoring systems Timely acquisitions gave the company access to new areas Maintained margins despite buying out operations in highcost Europe and the US Has virtually no competition locally in the organised sector

Opto has made four acquisitions— (the patient monitoring business of) Palco Technologies, Criticare Systems, EuroCOR, Advanced Micronic Devices, Devon Innovations and ORMED Medical Technology— and in the process, entered a range of new and related markets, including interventional cardiology, medical devices and medical catheters. Opto’s inorganic growth has saved the company up to five years of research and regulatory rigour.

Despite the slowdown, Opto has managed to hold fast on the margin front—around 29 per cent— despite buying companies with sizeable manufacturing operations in high-cost locations in Europe and North America. “We plan to eventually move all manufacturing to India,” says Ramnani. A lack of clarity on special economic zones (SEZs) and the potential tax extension of the tax holidays under Section 10 A/B mean that the Opto’s management is yet to decide on its future course. “We have land in Hassan (in southern Karnataka), which the government allotted for a SEZ. If the laws on SEZs are clarified, we will move manufacturing there,”says CFO Bhaskar.

Analysts worry about regulatory issues holding back the company’s progress. Although Opto has FDA approval to sell its non-invasive products in the key US market, it is yet to get the agency’s green signal for its invasive product range. Then, higher interest costs on the loan Opto raised to acquire Criticare also ate into its profitability for the latest quarter.