VLCC celebrates silver jubilee, readies for an IPO

Vandana Luthra knows how to make an entry. Clad in an ivory-hued dress, the businesswoman walks into a tiny conference room followed by an entourage of staff bearing trays laden with food. “Eat. It’s all healthy,” she urges guests, pointing to plates piled high with salad and falafel. She would know. After all, the 55-year-old Padma Shri awardee is the eponymous founder of VLCC (Vandana Luthra Curls and Curves), one of India’s best-known beauty and weight-loss brands.

When Forbes India met her, she was inaugurating the launch of a centre at New Friends Colony, south Delhi. This outlet is especially close to her heart: It marks a quarter of a century of VLCC’s presence in the wellness industry. “We completed 25 years on July 12,” says Luthra, pointing to a VLCC badge that she has pinned onto her dress. “I have grown from a daughter to a grandmother, and I’ve seen my business grow with me.”

The New Friends Colony centre is the 34th Delhi VLCC outlet and one of 300 in India and abroad. What started out as a standalone slimming clinic in Safdarjung in 1989 has evolved into a Rs 1,000-crore company with a presence in 16 countries, including Sri Lanka, Malaysia, Singapore, the UAE, Oman and Qatar. Luthra has given herself three to five years to reach an ambitious target of Rs 4,000 crore in revenues. She’s in a hurry to scale up because VLCC is getting ready for an initial public offering (IPO). “I can’t say when it will happen, but it will be soon,” she says.

Before going public, however, VLCC needs to strengthen its product portfolio and add more centres. The company describes itself as a slimming, fitness and beauty brand, but over the years, it has become much more: Business is divided between products (personal grooming, health foods and weight-loss supplements) and services (wellness centres and training institutes). Apart from spas and facials, and of course, weight loss programmes, VLCC’s clinics offer dermatological solutions to acne, microdermabrasion, Botox injections, and other such treatments.

VLCC has been on an acquisition spree over the past two years. In 2013—in a deal that’s believed to be a little less than Rs 200 crore—it acquired Singapore-based Global Vantage Innovative Group, which owns and operates three firms that manufacture and retail cosmetic products and solutions. Prior to that, it acquired Wyann International—which owned and operated a chain of 22 slimming and beauty outlets across Malaysia—for Rs 100 crore.

 “Wyann is the third largest player in Malaysia, and we had 23 outlets overnight. Since then, we have scaled up to 26,” says Sandeep Ahuja, managing director and group CEO, VLCC.

Through these acquisitions, Luthra wants to expand VLCC’s portfolio and use the company’s distribution network to sell its products overseas. For this fiscal, the company has set aside Rs 200 crore for the expansion spree. The plan is to add 50-60 new VLCC clinics (national and international) within 18 months. Luthra also wants to increase the number of VLCC institutes from 65 to 85 during this period. (The institutes train people for careers in the beauty and wellness industry.)

 “We are open to any mid-sized company that is favourable to us in the product or services space,” says Luthra, who is in talks with two international businesses—a dermatology products company and an Italian hair care brands.

At present, VLCC’s product business accounts for only 15 percent of the overall revenue. The bulk comes from its services business. However, this could change very soon.

Sameer Sain, co-founder & managing partner of the private equity firm Everstone Capital, which has a minority stake in VLCC, says that expanding its range of products is the key to VLCC’s future success. “There is only so much you can grow with the slimming business. The products side, which is a natural extension of VLCC, has to expand if the company wants to maintain its leadership position,” he says.

Luthra has already set the ball rolling. Apart from skin and hair care products, VLCC is also competing in the health food space, which it entered five years ago with the launch of bottled honey and isabgol (psyllium seed husks that aid in digestion). Since then, it has been adding products every year. In 2013, it was packaged muesli; this year it launched stevia (a herbal sugar substitute), and it is now preparing to introduce a range of healthy roasted snacks. “It could be ready-to-eat quinoa or khichdi,” says Luthra.

By entering the foods segment, VLCC is pitting itself against well-established industry heavyweights, including Dabur, which is a leader in the honey product segment. Luthra is undeterred by the competition. “We have done a lot of research and will position our products as food that can help people lose weight,” she says. “We have modified our products so that they aid weight loss. For example, honey alone cannot deliver results, so we have created fortified honey with 15 micro-nutrients, which can help a person shed those extra kilos. It is the same with isabgol, which again is fortified and meant to act as a hunger suppressant.”

These strategies are in line with the company’s vision of occupying as large a space as possible in the beauty and weight-loss industry. “We want to be significant players, if not leaders, in every part of the wellness domain we go into,” says Ahuja.

This could explain why VLCC has decided to tap the business potential of yoga. In November 2013, it entered into a partnership with Shilpa Shetty to launch YAP Yoga Pvt Ltd. YAP is an acronym for yoga and physiotherapy, says Luthra. Clients can choose from a variety of services to address health problems such as bad backs, joint pains and so on.

According to experts, the Indian wellness industry is still largely unorganised. A 2013 FICCI report values the industry in India at $9.8 billion, which accounts for less than two percent of the global market.

While the Indian market may be fragmented, there’s no denying that VLCC’s wellness centres are a prominent part of the landscape. But it’s taken Luthra years to establish the brand. Even before VLCC was born, she knew that she wanted to be a part of the beauty industry. After graduating in psychology from Delhi’s Lady Shriram College for Women in the late 1970s, she enrolled in courses in cosmetology and nutrition in Germany, London and Paris. “I kept doing these courses because back then, there was no one comprehensive course on beauty [in India],” says Luthra. It helped that her father Ram Arora was a director at Siemens, headquartered in Munich, Germany. “My father was often based there for 20 days in a month.”

It was around this time that she fell in love with Mukesh who was in the export business and married him at the age of 21. “We met at a Christmas party in Delhi. I was a homemaker for eight years after we got married. I had two daughters and devoted my time to them and the family. It was only when they were old enough that I decided to open my first VLCC centre, and for that, I took a Rs 3 lakh bank loan,” says Luthra.

The Safdarjung centre, which offered a weight-loss programme and beauty treatments, was a hit. “It gave me the confidence to expand.” Luthra roped in Mukesh—he is the company chairman—in 1992. “I requested him to join VLCC because I felt we were on the brink of something big,” she says. She was right, but it took a decade to establish VLCC in India.

Business grew steadily and 12 years after Mukesh joined, it started attracting private equity (PE) firms. VLCC got its first funding in 2004 when brokerage and private investment firm CLSA picked up a 13.65 percent stake for about $10 million (about Rs 60 crore). In 2007, Everstone Capital invested Rs 50 crore for a little less than a 15 percent holding. Today, it is the only PE investor; Luthra and her husband bought off CLSA’s share, and have an 85.6 percent stake in the company.

“VLCC had a promoter who had built a good management team, which is very rare. From the start, Vandana invested in good professional management. We also saw an opportunity for growth. VLCC had a profitable slimming business, but had not yet built a strong products line. That’s where we thought we could help,” says Everstone’s Sain. “We will be looking to exit soon. From the time we invested, Ebitda has gone up by 500 percent.”

One of the reasons for VLCC’s success is the way Luthra has positioned her company: She opted for the “medical route” instead of the traditional “glamour” branding to attract customers. “The very fact that we have 10 million happy customers makes us happy,” says Luthra.

But VLCC also has its share of disgruntled clients who say they regained all the weight they lost after quitting the programme. “I accept this as our failure. Having said that, it’s important to know that you will put on weight if you do not maintain a healthy lifestyle,” she says.

Luthra is excited about the next stage of expansion. Her daughters, Meera and Pallavi, too, will join Luthra, but there’s no hurry. “They are both young mothers, and I don’t want to push them into the business,” says Luthra. “I want them to take care of their children first like I did with them. I’m happy, too, because I have 6,000 children (employees) to take care of.”