"India will soon be another home market for us"

Malaysia-based IHH Healthcare Berahad is the world's second-largest healthcare provider on the basis of market capitalisation. It is also one of the largest healthcare chains in Asia with three subsidiaries - Parkway Pantai Ltd, Acibadem Holding and IMU Health. It is a strategic investor in Apollo Hospitals, whose rival, Fortis Hospitals, tried to take over Parkway some years ago. Parkway recently bought Hyderabad-based Continental Hospitals and tertiary care chain Global Hospitals. Dr. Tan See Leng, Managing Director and Chief Executive Officer of IHH Healthcare and Group Chief Executive Officer and Managing Director of Parkway, spoke to BT's P.B. Jayakumar on plans for India, Fortis' takeover attempt and investing in Apollo.

How do you view the changes in India's healthcare market? Have you missed the story here, despite having a 10.48 per cent stake in Apollo and a joint venture with them in Kolkata?

The Indian healthcare industry has grown by leaps and bounds. Decades ago, my partner and icon of the Indian healthcare industry, Dr. Prathap Reddy, came back from the US and started a chain of hospitals. Where it stands today, there is a big runway ahead for growth.

We were getting to know the Indian market, and in a big market such as India, you cannot go in without a strategy. We got associated with Apollo for a hospital in Kolkata. The two recent partnerships, with Continental Hospitals and Global Hospitals, came in quick succession. It is wrong to say that we were ignoring the Indian market. We were evaluating the opportunities.

You are building a hospital in Mumbai with the Khubchandani group. How far has it progressed?

The 450-bed Gleneagles Khubch-andani Hospital is taking longer than expected. We are in the final stages of resolving the key problems. It should open by 2017. It is basically a resource issue. We will open it in phases.

How do you plan to expand in India?

It is not easy to do greenfield projects in India due to the complexities involved in approval process, dealing with local construction companies/managers and land transactions. We decided to go for strategic partnerships with successful chains such as Global to minimise execution risk and save time. We give a lot of importance to our international brand Gleneagles. Our Juhu hospital, hopefully, will be named as Gleneagles Khubchandani. Also, at some point, we hope to marry the brand equity of Global with that of Gleneagles.

Our corporate philosophy is that people are the best investment. When we invest in a brand like Global, we are investing in doctors. Like Dr. Ravindranath (Chairman and Managing Director of Global) and his team, we are investing in the entire ecosystem. As you know, for years, interest rates have been low, and a lot of money is available for investment in new technologies, new buildings or cutting-edge medical equipment. However, at the end of the day, it is about people who operate these equipment. The best competitive advantage is people.

Has India emerged as a cheaper destination for healthcare investments compared with other Asian markets?

A hospital of our standards may require Rs 1.5 crore per bed in a metro city in India. This varies from country to country and city to city. We operate in Turkey, UAE, India, Vietnam, Malaysia, Singapore and Hong Kong. In Singapore, you have to spend a lot to buy land. In Turkey, most of our assets are leased. In our home country, the investment is 750,000 ringgits (Rs 1.1 crore) to 1.5 million ringgits (Rs 2.3 crore) per bed without land. So, the price point in India is more attractive, not necessarily cheap, but more attractive in terms of value addition, quality of service, productivity and cost effectiveness compared to, say, some hospitals in Thailand. That is why we are investing heavily in India. So far, ours has been the largest overseas investment in the sector in India.

In India, the occupancy is 70-80 per cent. In most of our markets, it is 60-65 per cent. In more developed markets, people don't want to stay in a hospital due to infection risk. In Singapore or Malaysia, the average length of stay is three days. In India, it is five-six days.

What are your capacity addition plans? Do you have an India plan?

We have about 7,000 beds. The target is 11,000-12,000 beds in two years. We have three home markets, Singapore, Malaysia and Turkey. Due to its potential and as per our expansion plans, India will soon be another home market for us.

We did two back-to-back sizeable acquisitions in India. In the next few quarters, we will improve service quality, marketing and backroom operations to our standards. Any new acquisition in India in the near future may be 'bolt-ons' or to support these two acquisitions. I don't have an obsession to become No. 1. The barrier entry in tertiary care is high. You need highly-trained clinical talent for complex surgeries. You may pump in hundreds of millions of dollars into a facility, but if you don't have the right talent, things will be difficult.

We have already invested $300 million-plus here. I am not in a position to say how much more we will invest but can say that we are going to make India a platform for growth.More than half our 4,000-5,000-bed expansion in the next few years will be in India.

Are you looking for a more fruitful partnership with Apollo? Or will you exit considering the new emerging alliances?

I always look at Dr. Prathap Reddy and family with a huge amount of regard and respect. They have so much knowledge about the sector. We have to learn from them. We hold a stake in Apollo Enterprises as a strategic investor. We are not on the board. At the subsidiary level, we have a 50:50 venture with them for a hospital in Kolkata. It is a localised hospital, and in this sense, we will not go to Kolkata, as we have to preserve the painstakingly built relationship with them.

The IHH investment in Apollo is from Khazana (Malaysia's sovereign wealth fund that has also invested in IHH) while Parkway's investments (including Global and Continental) are its own. I am the only person directly associated with the IHH board and Parkway Pantai. There is no conflict of interest as we don't have a board position in Apollo and don't interfere in its day-to-day decisions. As far as the Apollo investment is concerned, our shareholders have got good returns over the years. I see potential for growth in India in the next 50 years and don't want to miss this opportunity. So, if we get an opportunity to raise our stake in Apollo, we will consider, subject to the support of the family.

You had a bad experience with Fortis Group when it tried acquiring Parkway in 2010. You were at the helm then. What went wrong with the alliance?

We are still good friends. Fortis Chairman Malvinder Mohan Singh was my (Parkway) chairman for some time. I learnt a lot from them. Then I was the CEO-designate of Parkway and TPG sold its stake to Fortis. The moment I took over, the takeover battle started. I personally believe that if Fortis and Khazana could have worked together, it could have been a platform of growth. The failure could have been due to lack of time to understand each other. At the end of the day, business interests are permanent. I think in terms of alignment of business interest and timelines. If there were more frank dialogues and discussions, it could have gone ahead.

How do you see the future of India's healthcare industry?

Healthcare is a sunrise industry. In India, a lot of consolidation will happen. Also, a significant amount will be invested. As people become healthier, they live longer. But actually, you are just delaying the inevitable as still, in the last years of life, one will have to spend a significant part of ones earnings on healthcare. So, healthcare demand is insatiable. Whatever you put, people will consume.

In mature markets, investments are happening in emerging services such as pathology labs and day surgery centres. As a physician who understands epidemiological changes, I can say that the healthcare world is going to move in four big areas - the first will be big data analytics impacting delivery; the second will be customisation; the third will be wellness and anti-ageing; and the fourth will be very high level of excellence.