Oct. 02--MUMBAI -- India's top hospital service providers are adopting diverse strategies as they ready themselves to tap the expanding healthcare services market in India and other emerging economies.
The country's largest hospital chain Fortis Healthcare Ltd is sharpening its focus on the domestic market while Apollo Hospitals and Manipal Health Enterprises are eyeing both domestic and overseas opportunities in the mainstream hospital businesses and related areas.
Fortis Healthcare, which recently sold its overseas subsidiaries in Vietnam and Australia, wants to almost double its bed capacity in India in the next few years.
Fortis has 70 hospitals in India, Canada, Dubai, Hong Kong, Mauritius, New Zealand, Singapore and Sri Lanka. It also runs several primary health, day-care and diagnostic centres in these markets. "We are currently reviewing our overseas business, and the divestment of our assets in Vietnam and Australia were part of this exercise," said Fortis's chief executive officer Vishal Bali.
The divestment, he added, was mainly to reduce the debt burden in the company's books, and "now onwards our expansion will be in India".
Bali said the company will be able to add another 1,500 beds, increasing its total capacity to 5,500 in India by fiscal 2014. Its three new hospitals in Gurgaon, Chennai and Ludhiana, respectively, are expected to be operational soon.
Under the new asset-light model that Fortis has adopted for the business after transferring all the assets to Religare Health Trust Pte. Ltd -- formed with the primary mandate of investing in medical and healthcare assets in Asia-Pacific markets -- all investment in future expansion will exclude the land and infrastructure cost.
"Under the restructured business model, Fortis' investments into infrastructure, land and civil works will be carried out by the Religare Trust. So in all the new ventures, Fortis will have to invest only around 30% of the total cost," Bali said.
An investment banker familiar with the development said on condition of anonymity that Fortis may look at options for encashing overseas assets including its Singapore unit soon. Fortis did not confirm this. Fortis has a diagnostics chain, RadLink Asia, and a super specialty hospital, Fortis Colorectal Hospital, in Singapore.
"The earlier divestment have brought down our debt-equity ratio to around 0.6:1 now from the earlier 1.6. As of now, we haven't decided on any other assets for divestment. But in the review, we don't know where and when next," Bali said. Fortis had total debt close to Rs.7,000 crore before the asset sales and it currently stands at Rs.3,900 crore.
Meanwhile, the Manipal Group, which currently has a strong presence in the southern states of India, is looking to expand to overseas markets including Malaysia, South Africa and the Middle East by setting up hospitals and medical education institutions.
"We want to spread our presence to the Western and Northern states of India as well as foreign markets by setting up hospitals as well as medical education businesses," said the Bangalore-based healthcare group's managing director and chief executive officer, Rajan Padukone.
The value of the Indian healthcare services industry, as estimated by consultancy firms EY and McKinsey and Co. in 2008, was around $35 billion and is projected to rise to about $150 billion by 2017.
"India offers huge potential for the private healthcare providers as modern healthcare penetration is still too insignificant...and it is a proven fact that the government cannot be the sole provider to address the existing and the future demand," says Muralidharan Nair, partner (healthcare) at consultancy firm EY.
Manipal Health's expansion in India outside the southern states will begin with new hospitals in Pune and Jaipur, said Padukone. "We have medical education business in these locations already and our expansion into overseas markets such as Malaysia, South Africa and Middle East will follow the same model," he added.
The company is also focusing on in vitro fertilisation and andrology (male health) centres. The plan is to have 25 clinics in the next three years, Padukone said.
The country's second-largest hospital chain Apollo, too, has overseas and domestic expansion plans.
Apollo Health and Lifestyle Ltd, a subsidiary of Apollo Hospitals, is expanding its presence in India by adding 36 new "Cradle" centres, which are birthing (baby delivery) centres, in the next five years. It currently has four centres in India.
"We are going to have a pan-India presence with entry into cities such as Mumbai, Gurgaon and Kozhikode. Each centre will cost Rs.15-20 crore. The total estimated cost will be close to Rs.500 crore. There will be fertility centres called "Cradle Fertility" in all these centres primarily targeting working couples." said Neeraj Garg, chief executive officer at Apollo Health.
"We are also exploring the overseas option. Instead of setting up infrastructure abroad, which is not our current priority, we are ready to extend our expertise to existing units overseas markets." said Garg.
"Restriction in terms of ownership especially in Middle East countries has made (us) not to venture at this point in time."