New Delhi: Fortis Healthcare Ltd has become India’s largest hospital firm with its $685.3 million (Rs3,118.12 crore) acquisition of a stake in Singapore-based healthcare firm Parkway Holdings Ltd. Fortis will fund the deal through internal accruals, rights issue and foreign currency convertible bonds (FCCBs). In an interview, chairman Malvinder Singh spoke about Fortis’ plans after the acquisition. Edited excerpts:
You were expected to maintain a domestic focus right now. Why did you decide to carry out this deal?
We were earlier focused (on making) sure we have a pan-India presence and really focusing on the domestic market to go through organic and inorganic opportunities. In the middle of last year, when we acquired Wockhardt Hospitals, that gave us a pan-India presence. As we move forward, yes the focus on growth in India will continue through organic and inorganic opportunities. But clearly the aspiration is to be global, to be larger, and the first step was to get into Asia and to have a strong leadership position in Asia. Parkway is a company which today is the largest healthcare provider in the Asian market...
Some analysts say $685 million is on the expensive side. Take us through your assessment of the deal, and what the balance sheet is going to have to look like at the end of this acquisition.
In terms of the balance sheet, what we are aiming for is to work within 1:1 debt equity. If there is a spike in that, we will address that through the warrants that are currently outstanding or through another equity infusion. So, we will address that and we will try and keep the capital structure in the ratio of 1:1.
Balancing act: Fortis chairman Malvinder Singh says the company will continue to focus on and grow within the domestic market and will use Parkway and the Parkway brand for international acquisitions. Ramesh Pathania/Mint
Having said that, this acquisition is a very important and a very strategic asset for us. The reason I am saying that is when you combine the capability in the Fortis network and the Parkway network, we are sitting today with 62 operating hospitals. With some of the expansion and the new projects in, we would be sitting at close to 70 network hospital.
When you look at the other features we are sitting with over 10,000 beds plus more which are currently across both systems. We are talking about over 3,000 doctors within our network and we are talking about eight countries. And when you look at emerging markets, there is no other company that has (a) capability like this. We are talking of the combined group in terms of a net worth of annualized revenues today to look at it going forward of over a billion dollars a year. We are talking about a market capitalization in excess of $4 billion and profits which are significantly up.
...I think this is a win-win deal for the sellers and the buyers, it’s a very important strategic deal, it transforms Fortis and our healthcare business to a strong leadership position in Asia. We would use this capability to deepen our businesses in the existing market, get into new markets in Asia and then go beyond Asia. This is a global play for us. This is the first of the many things that we can look at doing...
You are relocating to Singapore. What does this mean for Religare Enterprises Ltd and your other businesses?
All our businesses have CEOs (chief executive officers) who (are) completely empowered to run the businesses and they have strong management teams to (do) that. Each business, I would like to see, with a clear global focus, I would like to see each of our businesses being in the forefront in the respective sectors at a global level. So our clear commitment from the group is to focus globally and also to be at the forefront of the business that we do.
Having said that, in healthcare we certainly believe there is a lot that needs to be done. I believe, it’s important for me to move to Singapore to work with the Parkway team because Parkway will be a route for the global expansion that we are going to do. It has global recognition in terms of brand, it has the capability, a very strong management and a medical capability and cutting edge technology. It’s also a hub for medical tourism.
So from a Fortis viewpoint, we continue to focus and grow within the domestic market and we will use Parkway and the Parkway brand for our international acquisitions and organic growth. So what (we) would like to do is to work with them and understand them and their business, work along with them to evolve in creative strategy and take our healthcare business to the next level of growth.
So it’s really focusing on what we need to do to achieve our aspirations, it’s focusing (on) what the business needs today. I believe, whatever, we need to do to create value, whichever person or whatever role or job or responsibility that we need to put people in, we will do it. And as the group head, I need to lead by example.
Parkway runs a hospital each in Kolkata and Hyderabad as a joint venture with Apollo Hospitals. Does your deal change that?
I am very happy with it. I think Apollo is a great hospital and I have great respect for (Apollo chairman) Dr (Prathap C.) Reddy. I would love to work with him.
You have closed four deals in the last five years. Are you planning to enter any new areas of business?
We have done quite a few of them (deals). I think, for us healthcare and financial services are the clear area of focus. There is a lot to be done on the financial services business at a global level. The teams are already working on it. We have concluded recently a large acquisition in the US. They have a mandate up to $1 billion to spend on asset management—they are working on opportunities and I hope we would be able to create a strong leadership position in that area as well.
Are you also thinking of an initial public offer for Super Religare Labs (SRL)?
Yes, in terms of SRL, we would like it to be listed eventually. In terms of timings, we would make an assessment of what the right time is, but certainly the intent is to list it and at an appropriate time we would certainly take it public.