New Delhi: Having completed the purchase of 10 Wockhardt Hospitals Ltd facilities, Fortis Healthcare Ltd is looking towards accelerated growth in 2010. In an interview, Fortis Healthcare managing director Shivinder Mohan Singh says acquisitions could play a significant role in future growth. The company will also look to tap the capital markets with an initial public offering (IPO) in the coming year. Edited excerpts:
You have just finally closed your deal with Wockhardt. What can we expect from Fortis for 2010?
Open to acquisitions: Fortis managing director Shivinder Mohan Singh. Madhu Kapparath / Mint
Growth is going to happen. You may get a Wockhardt—I mean, in 2009 we were lucky to get it—or may be a string of stand-alone independent centres pearled into a string; but growth is going to happen. We have already, with Wockhardt, seven greenfield projects that are in the pipeline. We are always looking for more opportunities. So I certainly believe that there will always be more on the table.
What is the kind of growth that you are actually envisaging? 15-20% growth is what the markets seem to be expecting. Do you continue to believe this is sustainable?
I think firstly we have grown over the last 5 years at about 70% CAGR (compound annual growth rate). We are hungry for growth and we will continue to grow pretty aggressively. I think safely for the next couple of years we should be growing 2X of the market without a worry. The rest of it depends upon opportunity, so it is a little difficult to say. Then comes the question of margins, so the growth revenues will certainly happen. I think what we have figured out over the last eight-nine quarters that we are growing revenues as also margins steadily. We have come to a very healthy position now and if I would have seen it 2-3 years ago I would have said that this would have been the icing on the cake, but I think we see a lot more today.
So give me a ballpark figure on what kind of margins you expect.
When we got into the business, we thought 20% Ebitda (earnings before interest, tax, depreciation and amortization) was really great. Four years into the company we found that 20% is going to happen at 50% occupancy, which was very surprising for us. Today we have hospitals that have touched 30%. There are 5-6 hospitals that have touched over 25% Ebitda as a larger facility. So my belief today is 25% will happen. The question is when. And that’s a function of how fast we grow, and how many greenfield projects we have, and how many acquisitions come down the pipeline.
On the pathology side, there was a lot of talk about a possible IPO. We understand that those plans were on the back burner, and perhaps are now off the back burner and back on the table. Is that right?
I think the markets, obviously, did not allow anybody to do an IPO at this time. Second, we did an acquisition last year. We picked up a lab in Dubai called Meena, and we want to make sure that we integrate and get the benefits before we go to markets. Otherwise, it again becomes a confused story. As far as I know, an IPO is on the cards. The question is: right time and place. I think that still needs to be firmed up. So as soon as the DRHP (draft red herring prospectus) is in, you’ll know it’s happening. I hope it’s in 2010.
Are you anywhere close to finalizing your DRHP as of now?
We are looking at 2010 for the IPO. We have not firmed up on time, place, money, pre-placement, etc. So like all good things, you will get to know as soon as it happens.
On the retail side, what are your plans, as far as wellness is concerned? Any acquisitions there?
I think in the retail space, we spent the first two years trying to spread ourselves in the north and understand how it works. I think we are pretty happy with the knowledge and the understanding we have at this point in time.
Now, it will be to get to the national presence, to spread the network, to get scale. And we are open to acquisitions, as we have done two-three acquisitions in the last 12-15 months anyhow.