We hope to have 3,000 operational beds in 2-3 yrs: Paras Hospitals founder

'Our Kanpur facility of around 400 beds will be in the investment range of Rs 200 crore', said Nagar

Paras Hospitals started its first 250-bed hospital in Gurugram back in 2006 at a time when the largest hospital in the Millenium city was a 50-bed facility. But after that instead of taking the usual route of expanding across large metros, Paras chose to get into smaller towns and cities, a trend that is expected to accelerate among large hospital chains post pandemic. The founder Dharminder Nagar spoke to Anjuli Bhargava on the changes he sees and expects post pandemic and his own group’s plans. Excerpts :

How have your plans as a hospital chain changed post pandemic ?

Our plans have not changed at a macro level pre and post pandemic. We remain focussed on expansions and new facilities in North India. There is a reason for that besides the fact that we are more familiar and this is the territory we know. We chose the North because the gap is maximum in this region. In the South, public and private infrastructure have moved hand in hand, access is better and so is the population to hospital beds ratio. Kerala and Tamil Nadu are known for their good healthcare access. To cite one instance almost every district in Andhra Pradesh has a good 200-300 bed decent private or public hospital. If not in every district, within 50-70 kilometers one can get to a decent hospital. In India for instance the South and West have better provision, a higher number of beds for a lower population where in the North and the East, provision is far poorer.

When we came into Gurgaon, there were no big hospitals here. The biggest one was 50 beds at the time. We started our Gurgaon facility and slowly expanded into Panchkula, Udaipur, Ranchi, Darbhanga, Bihar, Patna, Srinagar. We have been trying to solve access in a small way - not for all sections of society but at least for the middle classes. Access is not just financial, it’s also a physical issue. It has definitely improved in many smaller cities in the last ten years or so but it is far from what is required.

Within the next 2-3 years, we hope to have 3000 operational beds. Our 200 bed facility in Srinagar should start by October this year (2022) and a 435 bed hospital in Kanpur by April 2023. We expect to be operating a 400 bed hospital in Ludhiana by February 2025, a 350 bed facility in Meerut by April 2025 and a 300 bed one in Jammu by September 2025. Panchkula is already functional but we will be adding 260 beds there by April 2025. We might look at Faridabad too at some stage. These are of course tentative plans at present.

But at a micro level, we are like others adjusting our plans to the new reality. Take for instance our new hospital in Kanpur. Pre pandemic, I would have looked at having 80 ICU or critical care beds out of the 200. Now we are looking at 140. In general, the importance and criticality of critical care has been demonstrated during the pandemic and I expect this will reflect in the plans of many hospital chains.

Why don’t you buy existing hospitals instead of setting up from scratch?

We are open to all kinds of models. In Srinagar for instance the hospital we will be operating was meant to be a Sheraton hotel but now it has been redesigned into a 200 bed hospital. In 2017, we raised US $ 42 million through private equity and this is being used for expansion. We also use debt and internal accruals. We have managed to keep many of our facilities asset light. 

For instance in Panchkula we don’t own the facility but we have a revenue share model. The land and structure belong to our partner, was built as per our needs and we get to operate it for the next 30 years. This helps us keep our costs a bit lower than others. We’d be happy to do this with all our facilities but such opportunities don’t always come up in the zones we want to operate. 

The per bed cost is between Rs 50 lakh to Rs 1 crore for a 200-bed facility. We have even made a hospital at Rs 40 lakh per bed but in general I’d say for us the cost ends up being between Rs 50-75 lakh per bed. Most of the hospital chains who focus on metros have a per bed cost of around or above  Rs 1 crore.

Our Kanpur facility of around 400 beds will be in the range of Rs 200 crore. But again it is asset light. The land and the structure will belong to our partners and we will be operating the facility on a revenue share. We will finish it, equip and run it. In this, the investment by us is a little over Rs 100 crore and we aim to achieve breakeven in two years. In general, if breakeven is achieved in under three years, it’s considered to have paid off.

We are ambitious with our break-even targets as Kanpur and what one calls the Kannauj region has a population of almost 5 crore with the catchment for use at around 25-30 percent of the total. When I say catchment, I mean the middle class who can afford facilities like ours. In Kanpur, there is Regency and Madhuraj, two private facilities but many people still go to Delhi or Lucknow if they fall seriously ill. This whole region does not have any facility like what we will be offering. If we offer quality at a reasonable price, I think we can expect to break even sooner than the industry norm.

I am speaking of Kanpur but this segment - one that can afford to pay for better care - is growing countrywide but does not have access as there are no facilities. Many end up flying to the closest metro for anything that is even a bit complicated. 

What are your group plans ? Do you plan to go public at some stage ?

Yes but probably five years later. I want to reach a certain scale before tapping the market. The IPO would not be an exit game for me; it would simply give me the financial leverage to expand and double down on my business. In five years, we expect to have around 3000 operational beds across India and another 2000 in the pipeline. That will give us a substantial size, something the markets can view seriously.

Moreover, in five years or so, I see explosive growth for the sector as a whole. I think we have entered an era where health insurance will become a fundamental right in the next five to ten years and be it through private insurance or public insurance (Ayushmann Bharat) almost every citizen will be covered to some extent. This has opened up doors for the private sector. Affordability will remain an issue but at some level it will be mitigated through private or public insurance. This is likely to give confidence to private hospital chains to move into smaller cities and towns.

After the reform of the Medical Council of India (MCI) which has happened now the country is going to produce roughly 100,000 MBBS students a year and 50,000 post graduates. This is going to push up the availability of doctors all across the country. Look at Uttar Pradesh alone. It used to have 14-15 medical colleges around a decade ago. It will soon have around 45-50 state medical colleges soon and even this is actually not enough. 

So, private and public insurance has become central. COVID has given a huge filip to awareness. Earlier, people only kept aside money for weddings and education; healthcare was not a priority. That has changed. And at the other end, the supply of doctors is poised to shoot up in the next 5 years or so. By the second half of this decade, this should all result in what I expect will be explosive growth for the sector. So timing wise for us, it makes sense to wait a while before we think of tapping the market.