Will consumers benefit from consolidation among TPAs?

New Delhi: The third-party administrator market in the health sector is likely to see consolidation going forward as the segment is crowded with many players and it needs heavy investment in technology and high-quality customer service, according to a top official of Vidal Health Insurance TPA Pvt. Ltd.

Vidal acquired a small rival Vipul Medcorp Insurance TPA Pvt Ltd earlier this month for an undisclosed amount. Before this acquisition, there were 23 players in the TPA market.

A third-party administrator provides operational services such as claims processing under a contract to another company.

Girish Rao, Chairman and Managing Director of Vidal Health Insurance TPA, said in terms of size, the acquisition is a big one.

“I think consolidation will be imperative. Investment in technology is becoming a very critical piece of this business and unless you have the scale, who will not be able to deploy high-quality technology and high-quality manpower in this space, so consolidation I think is a very critical thing …being able to make an investment in the required.
“I think it (the market) is too crowded. I don’t think there should be more than…in my mind if you really see look at the top six or seven players, after that there are very-very small players and they will really struggle to make a serious investment in technology,” Rao said.

The acquisition of Vipul will give Vidal the scale and geography to expand in northern India and in the retail segment, he said.

“While we are in the same space in terms of competencies, the segments and geographies are slightly different. Vipul is extremely large in the north of India, basically the NCR region. We on the other hand are very strong in the south and west of India. So geography competency now comes into play and we now get a far wider reach in north India, not that we are not present there, we are always present, it will just deepen our relationships in north India from a complementary perspective,” Rao said.

Secondly, from a segment perspective, Vidal is very focused on government business and group business as a company.

That was Vidal’s main area of focus, Vipul on the other hand is very strong on the retail book in their business mix.

“For example, we do Ayushman Bharat in Punjab, MP, UP, but we had very little presence in the non-government market in those areas. Vipul has a very strong retail presence (there), they serve a lot of retail customers in those markets. So combining these two now, leverages our reach in smaller cities,” he said further.

On its presence in the eastern part of India, he said though there is an office in Kolkata, the presence is not that strong in the region. The company will look forward to expanding outreach there in the coming years.

Talking about the growth in the TPA industry, he said the current growth rate is around 15% per annum.

“The market is around that area (15%). We have grown at 18% in the last year. Our annual growth rate in the last three years is 15%.” He said the company hopes to garner revenues of about Rs 150 crore (combined entity Vidal and Vipul) in the current fiscal year.

“Next year we are looking at about 25% growth to Rs 200 crore in revenue. We are already a profitable company for a very long time,” he added.

With Vipul under its fold, the company is set to be among the top-three players in the TPA industry in the country.

On asked about any fundraising plans, he said as of now there is no such need, however, the company will evaluate the situation in about 12-18 months.

“In the short-term, we don’t need any funding but over the next 12-18 months we will evaluate our growth strategy, internationally and locally. If required we might hit the market but as of now I don’t see any requirement from the next 12 months perspective.”

About listing plans, the Vidal CMD said: “At some point, we plan to do it but I think it is a little bit early today. I need a little more scale and I think in the next 2-3 years we can get that scale and maybe after that.” Vidal manages over 14 crore lives with over 12,000 hospitals and 20,000 plus OP clinics. It has about 60% share of state and central government health insurance policy implementation.

The company’s network partnerships extend to Asia, Europe and North America. In India, they have offices and staff presence across 800 cities in 310 districts.