April 09, 2009

Philips to make India hub for medical equipment manufacturing

After acquiring two healthcare companies in India, Philips is working on a strategy roadmap to make India one of its global production hubs for medical equipment. The company plans to invest substantially on up-grading the acquired manufacturing facilities and increasing their capacity, with plans to start shipping them globally in another 18-24 months.

As per the plans, Philips is evaluating options to manufacture both new equipment and undertake refurbishment of old machines in India. However, the initial focus will be on value-segment medical equipment which has large market potential in Asia, Africa, CIS and parts of Europe.

Philips Electronics India senior director and head (healthcare business) Anjan Bose said the company is currently firming up plans to make India a global production hub. "The investment details are currently being worked out to expand capacities and upgrade the plants to meet global quality and regulatory standards," he said.

Philips last year made two healthcare acquisitions in India — Meditronics and Alpha X-Ray Techlonogies. By virtue of this, Philips acquired a footprint in manufacturing of medical equipment, with five plants that specialise in imaging devices and X-Ray machines. The acquisitions also enabled Philips access critical technology to develop value-segment products.

The company is planning to undertake more such acquisitions in India to further strengthen its value-segment portfolio. "We are exploring such options in ultrasound and imaging devices. The current time could be favourable for such acquisitions since valuations are low and several companies have cash flow issues. The acquisitions will help us to tap rural hospitals and needs of emerging markets," Philips India CFO Coen Reuvers said.

Philips India is also looking at newer business models to grow revenues in the slowdown. "We are planning to start the pay per use model in India, whereby hospitals and clinics will make a small upfront payment for the equipment and the balance amount will be realised on a revenue-sharing basis. We are currently evaluating 10-12 such proposals. This should protect us from the slowdown effect," said Mr Bose.

However, Mr Bose hastened to add that Philips’ healthcare business in India is yet to feel a major impact of the slowdown. "It’s true that there is a delay in decision making than previously. But, we are maintaining our robust growth rate and have, in fact, grown by double digit in the last two months over the same period last year," he said.

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