Booster shot
After the failed Parkway bid last year, Singh brothers of Fortis bounce
back with a spate of global buys. Can they lead in the Asian healthcare
market?
Malvinder Mohan Singh, Group Chairman, Fortis Healthcare
Sharp focusing and zooming in on opportunities comes naturally to this avid photographer. Malvinder Mohan Singh, Group Chairman, Fortis Healthcare, has looked at the world from behind camera lenses for close to 30 years now. Singh is also known for his big business deals. Be it the landmark deal involving Ranbaxy in 2008, where he and brother Shivinder Mohan Singh cashed out by selling their stake in the company to Japanese drug giant Daiichi Sankyo for a jaw-dropping figure of over Rs 9,000 crore, or the more recent ones aimed at making Fortis a global brand, Singh has made big news every time.
In less than 150 days after his failed bid to buy Parkway, a leading Singapore healthcare firm, Singh announced plans to buy the business of Hong Kong-based Quality HealthCare in October 2010. (He made money on the Parkway deal too after a counter-bid from Malaysia's Khazanah.) In December 2010, he picked up a 30 per cent stake in Australia's Dental Corporation Holdings for Rs 450 crore and followed this up with an offer in February to buy a majority stake. In February again, he acquired a cancer speciality hospital in Singapore for about S$33 million (Rs 115 crore). In March, he snapped up 28.6 per cent in Lanka Hospitals, a leading Sri Lankan entity, for an undisclosed amount, speculated to be upwards of Rs 160 crore.
There is more to come. "There are at least 20 deals that we are looking at today," Singh tells BT as he takes a short break from his busy travel schedule. The man, who also has permanent resident status in Singapore, has been spending much of his time travelling - closing or chasing deals.
So what's the big picture? "We want to be a leading integrated healthcare player in Asia," says Singh. Even as he steers clear of specifi c fi gures, his pace and appetite for big numbers is palpable. Today, apart from the forays into Hong Kong, Australia, Singapore and Sri Lanka, Fortis has a network of over 8,000 beds across 55 hospitals in India. That is an achievement given that its fi rst hospital in Mohali came up only in 2001.
Apollo Hospitals, the other Indian biggie in this space, made its debut way back in 1983 in Chennai and has grown to 8,200 beds (5,600 owned and 2,600 managed) across 53 hospitals (36 owned and 17 managed) largely within India. It also has hospital presence in Mauritius apart from its Apollo clinics in West Asia. However, a comparison between the two may not be an ideal one as Apollo's growth has not really been as inorganic as Fortis's.
Global market ventures are fraught with challenges. Take, for instance, Fortis's deal with Lanka Hospitals. Earlier, Apollo was in a tieup with the Lankan entity but exited four years ago, having sold its 30.63 per cent stake for Rs 63.15 crore. In fact, the 2009 annual report of Lanka Hospitals says while the Apollo brand name was a plus point for the hospital in the global market, it offered few positives in the local market where perceptions of high cost, Apollo's non-Sri Lankan identity and it being less in tune with local healthcare needs apparently played spoiler.
Critics say, like Apollo, Singh will need to take on the local challenges in a foreign market and ensure a return on his investment. And this, without a major stake in Lanka Hospitals.
"The Sri Lanka government today wants to do a lot of things in health care. We are committed to that market and this is an entry to working in that direction," Singh says while conceding that nothing comes easy.
Singh is upbeat about the market and does not seem rattled by local issues in the new countries he has entered that could include elements like local connect, identity, availability of doctors and the need to refurbish hospital equipment. Nor would he compare the return on investment from Fortis's overseas ventures to its Indian ones. Apollo declined to comment on both Fortis and the Lankan venture.
In many ways, Singh's Singapore investment - in a superspeciality, under-construction cancer hospital - seems unique. Obviously, the initial focus here is on spending and building rather than on returns. But then, Singapore, Singh has maintained, is a very important and highly developed healthcare market, and a hub in Asia. "This is important for us. It is a re-entry into Singapore and our fi rst step in healthcare market there," he says.
Experts agree, pointing out that Asia, in particular Singapore, could be a very important market for health care. "Opportunities in the US and Europe are limited as health care there is state dominated. The focus on emerging markets, particularly Asia, could be a good bet for Indian companies," says G. Kali Prasad, Partner, Ernst & Young. The trick is to leverage presence in locations like Singapore to tap medical tourism, he adds. "Creating a big umbrella brand will also help attract talent, open up opportunities for outsourcing back-end work to India, cut costs and make Fortis a more competitive global player," he says.
The risks of an inorganic growth model, be it in health care or any other sector, he says, typically relate to integration. In the case of health care, the key concern for global ventures will be the environment and quality of service.
Back home, in keeping with the trend of reaching out to smaller towns, Fortis, says Singh, has started with locations like Meerut and Moradabad in North India. Apollo too, under its Apollo Reach programme, has set up four hospitals in small towns and targets 250 facilities in the next fi ve to seven years. "It is inevitable and essential that health care in these regions become organised, and therefore should be the way forward for entities like Fortis and Apollo," says Dr Ashwin Naik, Founder of Vaatsalya Healthcare, which is focused on tier II and tier III towns. While Naik agrees that the trend will lead to entry of professionals and improve healthcare standards in smaller cities, the fl ip side for smaller players like him would be increased competition. There will be fi erce competition for talent in the short term as there is limited healthcare talent in India.
In a country where doctor-to-bed ratio is poor, talent shortage is an issue in both urban and rural India. It is perhaps time for Singh to train his lenses on talent and draw up a blueprint to play his part in building this scarce resource.
There is more to come. "There are at least 20 deals that we are looking at today," Singh tells BT as he takes a short break from his busy travel schedule. The man, who also has permanent resident status in Singapore, has been spending much of his time travelling - closing or chasing deals.
So what's the big picture? "We want to be a leading integrated healthcare player in Asia," says Singh. Even as he steers clear of specifi c fi gures, his pace and appetite for big numbers is palpable. Today, apart from the forays into Hong Kong, Australia, Singapore and Sri Lanka, Fortis has a network of over 8,000 beds across 55 hospitals in India. That is an achievement given that its fi rst hospital in Mohali came up only in 2001.
Apollo Hospitals, the other Indian biggie in this space, made its debut way back in 1983 in Chennai and has grown to 8,200 beds (5,600 owned and 2,600 managed) across 53 hospitals (36 owned and 17 managed) largely within India. It also has hospital presence in Mauritius apart from its Apollo clinics in West Asia. However, a comparison between the two may not be an ideal one as Apollo's growth has not really been as inorganic as Fortis's.
MALVINDERSPEAK On how opportunities are spotted: My acquisitions are driven by a core team in Religare investment banking. They are mandated from Fortis to go and look for opportunities. They are our investment bankers and we are one of their biggest customers. On the deals in the works: There are at least 20 deals that we are looking at. As for India, we get dozens of proposals every week to either acquire or manage. On global strategy: We want to be a leading integrated healthcare player in Asia... Once you have scaled across multiple countries and across different verticals, you can keep your front-end business localised but the knowledge that you bring in (about running hospitals in these countries) is the intellectual property that is very substantial in value. On sharing responsibilities with brother Shivinder Mohan: Shivinder looks after the Indian part of the business and I look at the global part but we work together at the group corporate level. |
Global market ventures are fraught with challenges. Take, for instance, Fortis's deal with Lanka Hospitals. Earlier, Apollo was in a tieup with the Lankan entity but exited four years ago, having sold its 30.63 per cent stake for Rs 63.15 crore. In fact, the 2009 annual report of Lanka Hospitals says while the Apollo brand name was a plus point for the hospital in the global market, it offered few positives in the local market where perceptions of high cost, Apollo's non-Sri Lankan identity and it being less in tune with local healthcare needs apparently played spoiler.
Critics say, like Apollo, Singh will need to take on the local challenges in a foreign market and ensure a return on his investment. And this, without a major stake in Lanka Hospitals.
"The Sri Lanka government today wants to do a lot of things in health care. We are committed to that market and this is an entry to working in that direction," Singh says while conceding that nothing comes easy.
Singh is upbeat about the market and does not seem rattled by local issues in the new countries he has entered that could include elements like local connect, identity, availability of doctors and the need to refurbish hospital equipment. Nor would he compare the return on investment from Fortis's overseas ventures to its Indian ones. Apollo declined to comment on both Fortis and the Lankan venture.
In many ways, Singh's Singapore investment - in a superspeciality, under-construction cancer hospital - seems unique. Obviously, the initial focus here is on spending and building rather than on returns. But then, Singapore, Singh has maintained, is a very important and highly developed healthcare market, and a hub in Asia. "This is important for us. It is a re-entry into Singapore and our fi rst step in healthcare market there," he says.
Friends and rivals: Malvinder Mohan Singh with Apollo Hospitals MD Preetha Reddy
The risks of an inorganic growth model, be it in health care or any other sector, he says, typically relate to integration. In the case of health care, the key concern for global ventures will be the environment and quality of service.
Back home, in keeping with the trend of reaching out to smaller towns, Fortis, says Singh, has started with locations like Meerut and Moradabad in North India. Apollo too, under its Apollo Reach programme, has set up four hospitals in small towns and targets 250 facilities in the next fi ve to seven years. "It is inevitable and essential that health care in these regions become organised, and therefore should be the way forward for entities like Fortis and Apollo," says Dr Ashwin Naik, Founder of Vaatsalya Healthcare, which is focused on tier II and tier III towns. While Naik agrees that the trend will lead to entry of professionals and improve healthcare standards in smaller cities, the fl ip side for smaller players like him would be increased competition. There will be fi erce competition for talent in the short term as there is limited healthcare talent in India.
In a country where doctor-to-bed ratio is poor, talent shortage is an issue in both urban and rural India. It is perhaps time for Singh to train his lenses on talent and draw up a blueprint to play his part in building this scarce resource.
