 "We have a potential of 10,000 beds in India: Vishal Bali")
How are you expanding in India?
We started the year with a target to add 1,000 beds through new hospitals and additions to old facilities. In the first quarter, we launched our flagship hospital, Fortis Memorial Research Institute, in Gurgaon. Between the third and fourth quarter, we will launch our remaining two hospitals in Ludhiana and Chennai. In Phase-I, the Gurgaon facility has been launched with 450 beds, while the other two will have 200 each. Besides, we will also add capacity to our old hospitals in Mohali and Bangalore. At the end of FY14, we will have a total of 5,000 beds. We have a potential capacity of 10,000 beds within the network, which can be unlocked through old, new and bolt-on (new facilities or upgrade) projects.
What plans do you have for Tier-II markets?
We are already present in Tier-II cities, with hospitals in Amritsar, Dehradun, Agra, Mysore, Kangra, Raigarh and Raipur. This experience gives us the opportunity to expand in metros and Tier-II cities.
You have recently sold businesses abroad. Will you be selling any more units?
With divestments of key international assets, our India business now contributes 95 per cent to the group revenue, while the remaining five per cent comes from the international assets. We have taken a strategic decision to focus and grow in India; therefore, capital allocation will be directed to the India hospital and diagnostics business. We continue to have our international assets in Singapore, Sri Lanka, Dubai and Mauritius.
The debt was more than Rs 6,000 crore in FY13. What is the current debt level and how will it be reduced further?
Our net debt as of September 2013 is Rs 2,963 crore, which is down by 49 per cent on a year-on-year basis. Our debt equity ratio has come down from 1.7x to 0.6x and after the divestment of our Hong Kong business for $355 million, this will reduce even further and we expect the debt equity ratio to be 0.3x. The balance sheet of the company has gone through a complete transformation both through the equity raised and the divestments. We have successfully de-leveraged and strengthened the company towards future growth.
Are there any more additional fund-raising plans?
We have completed the fund-raising activity in SRL diagnostics last year and have recently concluded the equity and equity-linked raise in Fortis Healthcare, besides the international divestments that have infused capital into the company. Currently, we do not have any immediate plans for a fund raise.
What is the potential of the Indian healthcare market?
The demand-supply gap in healthcare services will continue to drive the upward trajectory of the companies within the healthcare delivery sector in India. The growing aspiration of the Indian healthcare consumer to receive better healthcare and the rise of third-party payment mechanisms like health insurance towards more affordability will ensure that the sector continues to grow upwards of 15 per cent a year. With healthcare forming 11 per cent of the total household expenditure of an average Indian family, the macro-economic rationale for consumption of healthcare services will continue to fuel the sector in years to come.
What do you perceive as the major challenges?
We have a very nascent healthcare consumable and technology sector, which makes us dependent on imports and thus increases our susceptibility to the fluctuations in international currencies and increases the costs associated with this fluctuation. A more vigorous domestic manufacturing base in both these areas will be a key growth enabler within the ecosystem and will keep costs under control and thus increase affordability. Climbing real estate costs both in tier-I and tier-II cities continue to have a serious impact on infrastructure costs, driving them upwards, limiting growth opportunities.
For a country with 1.3 billion people, we need to take a long-term view and fast-track the growth of medical education to increase the talent pool requirement of this sector in the future. Other countries in the Asian subcontinent are investing and doing a lot more to enable the growth of their healthcare delivery sector.
What is the level of foreign interest in the Indian healthcare market?
India's private healthcare delivery sector has attracted tremendous interest from private equity investors over the past two years. The sector has attracted more than $1.2 billion funding between 2012 and 2013. This year alone, more than 32 transactions valued at $465 million have taken place in the healthcare delivery sector across hospitals, diagnostics, clinics and day-care surgical centres. This increasing investment trend will accelerate the development of infrastructure and technology and improve accessibility for better healthcare in India. Overall, healthcare expenditure in India is amongst the lowest globally at four per cent, while the global average is 9.7 per cent.