“We were always asking: Are we the natural owners of this business? And our view is that we have almost ceased to be natural owners of the business," Singh said in an interview. “If the business doesn’t grow, by definition, it dies, so how do we encourage the legacy and the sustainability of Max Healthcare."
Singh had earlier wanted to give up control of the insurance business when he started talks with HDFC Life. The move failed. However, now he is bullish on insurance and is aiming to grow the business through mergers and acquisitions. Other areas of interest include real estate, angel investment, and senior living and hospitality. Singh said he will decide on new business ideas after the Lok Sabha elections in 2019.
When we met two years ago, you were very bullish on the healthcare business. What has changed?
Frankly, its a time-in-life question…between two years ago and now, the business arena has moved very substantially. Every sector and every business is more competitive and in every sector margins are under stress…in every sector, talent availability is also becoming a challenge, retention is becoming a challenge…basically, any successful business is seen with a new level of challenge and toxicity of its own kind. So, basically we started to think about how we must balance our portfolio. You cannot do everything with the same level of commitment and same level of growth. In that sense, the business, which is the most demanding in terms of capital, in terms of time, to maintain adequate margin is healthcare...It is still not an organized sector…therefore, scale is very important. Scale means capital investment. So, we have to take a call…And, if we deploy the level of capital required to get the scale in the healthcare sector, we are talking about a minimum of 1,000-2,000 beds. So, if you take the rule of thumb number of even ₹ 1 crore per bed, which is always not the case, in cases of neuro, cardiac and oncology it can go up to ₹ 3 crores a bed…1,000 beds means ₹ 2,000-3,000 crore. We do not have that sort of capital available with us. Besides, if I take a look at the succession plan in terms of the management team available, I don’t have now 10 years available of life to be able to focus on building Max healthcare to take it to the next level. We are very practical about these things, we are very aware about these things.
So, what happens to your legacy? You wanted to exit the insurance business but that didn’t happen. You spoke about real estate, education, manufacturing, etc. We have not seen much action there either.
One year ago we decided not to (venture into) the education business. We were very keen….in 1999-2000…there were four sectors that we had identified--healthcare, insurance, education and hospitality. About six months ago, we decided not to go ahead with education, even after spending two years and having started a team who were going to help us. The truth of the matter is that regulatory forces in the country didn’t help us get off the ground in the education space, because if you buy real estate at commercial prices, you can provide education, but you cannot have education business. If you get into any society structure or any existing education institution, you try shutting a school with 500 people you go to jail. Therefore, we dumped education. Manufacturing, I never said. I always said we will be all services sector company and we will hold one manufacturing business for cash…that’s what we said and that’s what we are doing…we are not going to grow the packaging film business.
What are your priority areas going forward?
Life insurance, real estate, investing, senior living and hospitality.
Hospitality is in your personal capacity, right?
To begin with, even telecom I started as a personal venture….that is simply a question of a capital structure…we started hospitality as a personal business because at that time the demerger of Max India had not happened. And, as a listed company, which had interests in healthcare and insurance, if I had announced that we are getting into hospitality, the stock price would have tanked by 50%. Now that we are building some scale in hospitality…who knows it can continue to be private or may become...a little bit of both. That’s just a matter of capital, convenience and timing. And, as you know, our whole history has been to live a life of a listed company--be it in governance, compliance, disclosures, whatever it maybe. So, I am not afraid of listed companies…we like listed businesses. We will run our private businesses exactly the same as we run our listed companies.
What’s your overview of the insurance business? You wanted to exit because you thought that the space was too cluttered.
Since the HDFC merger failure we have grown 25%. We are the largest non-bank private life insurance company. So, if you ask me I don’t know why the other 18 exist…I can tell you….why we exist… Agency business is growing at 33 -40% month on month. We have just engaged into a renewal refresh exercise with New York Life... They have given us branding support and New York Life just recently acquired 2% of Max financial services. Life insurance is only going one way, which is up.
Do we see you expanding in that space through M&A?
100%! We will expand and we are expanding.
You have made a name for yourself by creating value, your shareholders have always benefitted...
Right now what I have stated… Let the election come and go… Let some more hiccups happen then we will tell you what are the new things. Life insurance, real estate, investing, senior living and hospitality. There is a huge opportunity in real estate and the key differentiator in real estate is going to be 2-3 things….execution., efficiency, openness, transparency and honesty. Openness, transparency and honesty has not been a feature of a real estate industry. In the investment business, I can be quiet successful because I understand the country, I understand the market and I know people like them. Senior living is exactly like health insurance when we started health insurance for the first 5 years health insurance was a dead duck now why it is climbing up because people have begun to realize that they need health insurance. Senior living will be the same.
What sort of legacy you want to leave behind?
I want to leave a positive legacy and I quote it saying I don’t want to leave a legacy of Ranbaxy, Fortis and Vijay Mallya.