Hospitals in India are ripe for the picking, feels Ramesh Krishnan, Chief Executive of Parkway Pantai’s India operations, as he scouts the healthcare landscape here for suitable assets to acquire.
There is a readiness for consolidation, there are hospital promoters willing to let go and there are good assets available, he says, but it depends on what you are looking for.
Parkway Pantai is wholly-owned by Malaysia’s healthcare major IHH Healthcare Berhad and investments done by it in India are executed and operated through Parkway. IHH was recently in the news for reportedly showing interest in acquiring Fortis Healthcare through a possible stake sale by the Singh brothers, former promoters of the troubled drug company Ranbaxy. But IHH put a lid on the reports by making a public disclosure in Malaysia last month saying it was not close to concluding any transaction in India.
In fact, its been close to two years since IHH's last acquisitions of Hyderabad-based Continental Hospitals (₹310 crore) and Global Hospitals (₹1,284 crore), respectively. But even as the two transition into becoming Gleneagles Hospitals (a global IHH brand), Krishnan says, their appetite is far from satiated.
The search is on for large hospitals in big cities and a key factor for IHH is to have a controlling 51 per cent stake in the entity. That's where most of the discussion with promoters of hospitals takes place, he says.
As doctors become entrepreneurial, they build big hospitals, observes Krishnan. Hyderabad is one such market “poised” for consolidation, he says, as at any point there are four to five assets in “trouble”. And this picture is true of other cities as well, he observes.
Mirroring pharmaceuticals?So does healthcare mirror a similar path as pharmaceuticals where promoters expect high valuations for their assets?
“If you compare it with other markets and purely base that judgment on valuation on multiples alone, you will find Indian multiples to be high,” he says, adding that it was just one of the parameters of doing a valuation.
Explaining how IHH or Parkway evaluates entities, he says, it's not about the infrastructure or number of beds but the niche clinical work the hospital does that makes it an interesting asset. With Global Hospitals, the unique feature was its liver transplants expertise and Parkway expects to grow this into a multi-organ transplant service, he says.
Admitting that promoter-run hospitals sometimes have corporate governance issues, he says, IHH ensures that such concerns are first “cleaned up” before they even enter the fray to invest in it. But their strategy will continue to be skewed towards inorganic growth, he says, as greenfield projects come with the challenges of getting approvals, setting up and so on.