Home >Companies >People >We want a million students in 5-7 years: Manipal’s Ranjan Pai

The Manipal Education and Medical Group (MEMG) has built a reputation as a smart and aggressive investor. The group’s chief executive is Ranjan Pai, who created the corporate structure of MEMG and separated its not-for-profit universities from the for-profit units. In an interview, Pai, whose net worth is $1.4 billion (around 8,610 crore), according to Forbes, spoke about MEMG’s strategy for the next three-five years, its acquisition plans in healthcare, and how the group is using its funds for investing in start-ups. Edited excerpts:

At the group level, what’s your strategy over the next three to five years? Will you continue to focus on existing areas or are you planning to enter newer areas?​

We have the four verticals: healthcare, education, stem cell research and student housing, in addition to our fund Aaron Capital. We’ll continue to focus on these areas. We may add one or two businesses along the way. It could be linked to something that we already do—for example, it could be something like health insurance. It could also be something totally different. As long as it’s a well-run business, for all you know, we could acquire something—as long as we feel we can put together a good corporate governance and management team. But the concept will always be there—that it will be professionally managed both at the board and management levels. The family’s role is getting lesser because we’re saying that we want to be investors, we want a separate management and ownership.

What is your role and how involved do you get?

I normally only get involved when there’s any kind of a fund raise, divestment, debt raise or acquisition. Otherwise, each company is run by their teams, which report to their board of directors. My role is from the point of view of the holding company. The good thing is that it’s never boring. Problems come and land up here and there’s always some firefighting to be done. It keeps things interesting.

What plans on the funding side?

Right now we’re well-funded. IVFA (India Value Fund Advisors) is an existing investor—Kotak exited last year. And we have lines of credit from banks. So if we need it, we can always raise more funds. IVFA can put some more money in that case, but right now we’re OK. Eventually we will raise more money if we have to execute all of what we’ve planned.

Are you planning to put in more money in Aaron Capital?

The corpus is over $50 million currently. We’ll wait for a year and see if we want to raise another $50 million. The good thing about investing is that you get to meet a lot of smart, new entrepreneurs. The difficult thing is to make the exits happen. All PE (private equity) guys are struggling to exit and I’m sure we’ll face similar challenges. Luckily we’re not under pressure to return money to LPs (limited partners who invest in PE and other funds), so we’re likely going to be invested over a longer term than some of the PE guys.

Are you looking to invest in more start-ups?

On average, we’ve invested $1-2 million across nine start-ups; a couple of them are $7.5-8 million. We may do more start-ups, but by and large the focus is on the current portfolio. It’s a bandwidth issue for us. We don’t want to have 20 start-ups and not spend enough time with any.

Is there an exit likely within the next year or so?

I’d like to stay long-term with all these companies, but I also want to see some churn and nothing like getting exits to show you’ve made money. I would like to see them raise the next round from third-party investors because there’s no point in us continuing to fund our companies and believing that this is the value and we’re in the money. Getting third-party valuation is important. For us the ideal time frame to exit would be four to five years. But if a company is doing well, we’ll stay 10 years.

You’ve been actively acquiring hospitals. Any more deals coming up?

Healthcare is doing really well for us. We just acquired a hospital in Jaipur and we’re looking at a couple of hospitals in Delhi and Mumbai. Greenfield (fresh projects) we’ll probably avoid in these areas—if you try to do a greenfield in Delhi or Mumbai, it’s not easy. In Bangalore, we’re looking at two more hospitals. We’re looking at adding 2,000-3,000 beds in the next two to three years. In Malaysia we acquired a 70-bed hospital, which is going to be expanded into a 200-bed hospital. Our expansion will be a combination of greenfield (building hospitals) and brownfield (acquiring hospitals).

You’ve always kept your universities separate from your corporate side. What further plans do you have on your education side?

Right now we have three universities; we might have one more university coming up in Bangalore. We also own universities overseas. We might think about expanding in South Africa or Sri Lanka, but we’ll do that step by step. We may raise some money for that.

What will be your big growth drivers in education, in the international side and in India?

Both will continue to grow—we’ll see decent growth in both areas. Of course, international campuses will start slowing down if you don’t add more programmes or courses. But luckily we just got a brand new university in Malaysia—so for the next five-six years, there should be growth there. Dubai continues to grow for us—we might have an expansion of the campus over the next 12-18 months. Antigua is doing really well—so we will have growth for the next five-six years.

You had plans to launch new services in education, which hasn’t happened. Are you seeing any slowdown in the for-profit segment in India?

We are not seeing a slowdown—actually India is growing really well. Corporate education continues to grow, the demand is there. If the whole economy slows down, it will have an impact. It depends on which segment you operate in. If you look at segments like banking and IT (information technology), these segments continue to grow and they require people. And that’s where we’ll focus on—so segment-wise we’ll be OK.

Any new categories that excite you in education?

I think technology-driven education is the place to go. We’re trying to see how we can expand those services in India. There’s a lot to be done. Today we have 250,000 students—there’s no reason why we can’t reach a million students in the next five-seven years.

On the real estate side, you’ve invested in quite a few properties. Is that a major source of funds for Manipal?

No, it’s not. It’s not liquid. It’s just that traditionally we had invested in real estate, but in markets like these, it’s not liquid. But I think it’s a great asset class—I’m a strong believer in real estate, especially local real estate. I think you need to be close to your real estate. We don’t, however, want to be in the real estate business. Right now we’ve got our plates full—whatever money we have, we’re putting in healthcare and education.

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