Even as legal battles continue to simmer in the background, IHH Healthcare, one of Asia’s largest hospital groups, has identified India as a key growth market, with its sights firmly set on becoming one of the country’s top three private healthcare players.
“India is now one of our high priority markets,” Prem Kumar Nair, group CEO of IHH Healthcare, told ET in an interview. “The resolution of the mandatory tender offer (MTO or open offer) issue opens up an opportunity for us to invest more and help Fortis grow into a very high quality hospital group.”
Nair said the ambition is to increase its stake in Fortis Healthcare to 50% over the medium term, as the group looks at increasing the beds to 10,000 in India by 2030, but he is clear that growth would not dilute clinical quality.
“You can have 15,000 low-quality hospital beds versus 5,000 high-quality, high-intensive-care beds,” he said. “That’s not what we want. If you are chasing hospitals and beds, you will end up with hospitals which are not of good quality.”
IHH has committed a capital expenditure of ₹2,500 crore for next three years to drive its expansion which will be driven by brownfield projects at existing Fortis clusters including Punjab, Jalandhar, People Tree in Bengaluru, and Manesar in NCR alongside the full integration of Gleneagles into the Fortis network, which now spans 36 hospitals. The conviction runs deep enough, Nair said as IHH’s entire board is in India this week for a two-day visit to Fortis facilities.
Fortis, he said, delivers clinical quality that matches or exceeds facilities elsewhere in the IHH network. “I went back and told everyone, you will be surprised at the clinical quality in Fortis and Gleneagles. It is the same or even better than some of the care in other countries”.
Ashok Pandit, group chief corporate officer (CCO) said the group is looking at integrating Gleneagles into Fortis and then further increase its investments in India. “Our long-term or medium-term ambition is to be at the 50% mark when it comes to a Fortis shareholding level,” Pandit said.
IHH holds just 31% of Fortis, a figure that did not move despite the completion of the open offer. When asked how Fortis acquisition is adding to the EPS of IHH. Pandit said, “When we took over to now, Fortis is running at mid-20s- 23-24% Ebitda margins, very strong profitability. The impediment is we own only 31%. But I think given the fact that we remain bullish and we want to invest more, we see the EPS to be accretive for us going forward”.
Despite the turbulence that followed, Nair said they entered India at the right time. The group made an investment at ₹170 per share and today the stock trades around ₹800. “Had we not made this investment in FY19 and tried to come in now with current valuations, it would have been almost impossible,” said Nair, underscoring the strategic foresight behind the entry.
Pandit said from a loss-making entity to now, Fortis has had a good run in terms of value creation for the investors. The Fortis share has since touched ₹1,000, currently trading around 800. The hospital group now runs at Ebitda margins of 23-24%, with revenue growing in the mid-teens and Ebitda expanding at roughly mid-20s percent annually over the past five to six years. The bed count has grown and the hospital count has expanded from 27 to 36, including Gleneagles facilities.
Beyond hospitals, IHH is repositioning its diagnostics arm formerly known as SRL-briefly rebranded as Agilus, and now operating as Agilus with a tagline-as a high-end genomics laboratory.
The brand transition was not without cost. Roughly ₹50 crore was spent marketing the Agilus name before the original SRL brand was reacquired through a bidding process. The IHH executives acknowledged the detour but defended the decision.
“At that point there was no choice. The brand was not owned by us. We brought it back. There’s always value in the brand,” Pandit said. Adding that the business is actually doing quite well.
“So when Fortis comes out with their full year results, you will see Agilus is now pretty stable, pretty steady, running very good margins. And similar in lines with the way Fortis has done. Apart from the normal business, diagnostic business, they are very focused on high-end genomics business and this is quite special and unique, especially for the case of Agilus, because most of the other labs don’t have hospitals along with the group. Here, Fortis and Agilus work completely in tandem. So they have now started focusing in a big way on genomics and precision medicines. It makes a huge impact on patients,” Pandit said.
The group says Fortis already ranks among the best clinical facilities in its global portfolio, which spans Malaysia, Singapore, Turkey and India.
In a market where rival healthcare leaders aggressively expand beds, IHH is deliberately positioning itself differently. The group wants to be known not just as a profitable healthcare business, but as a clinical leader.
Beyond beds and hospitals, IHH is pushing hard into ambulatory care knee replacements, spinal procedures, cardiac interventions, and chemotherapy delivered outside hospital walls at significantly lower cost. Nair said. “A lot of things that needed hospitalisation in the past can now be done in the outpatient sector. Cost adjusts automatically”.
In India, the group is also running a “true cost project” a line-by-line review of hospital billing to identify and eliminate inefficiencies, with the goal of passing savings on to patients.
IHH also plans to invest heavily in advanced clinical equipment. Oncology has been identified as a major focus, with Fortis’s FMRI already housing India’s first MR-Linac. Group procurement gives IHH pricing power across markets.
Source: Economic Times