In post-Independence India, time and again there have been many moments when a policy change or an intrepid entrepreneur causes a complete change of the game and catalyses either the birth of or a rapid transformation of the landscape for that particular business sector. In the last 30 years alone, some of these game-changing milestones include Sanjay Gandhi’s launching of Maruti, Rajiv Gandhi’s dismantling of licensing and moves to modernise technology and telecommunication sectors, Reliance Industries’ first really mega project (Jamnagar refinery) and subsequent entry into the telecommunication sector, Kishore Biyani’s bold moves in retail followed by Mukesh Ambani’s entry into the sector, arrival of Infosys, L N Mittal’s spectacular success globally, leading to escalation of ambition of many others in India, Ratan Tata’s successful launch of Nano, leading to many others in other industries to look at innovative solutions for India’s specific challenges and needs, etc.
Fortis’ investment in Parkway of Singapore could well be the turning point for the Indian health-care sector. In 2010, health care is already India’s second-largest consumer-spending sector. At about Rs 180,000 crore in size, it is significantly smaller than Indians’ spending on food and grocery, but already more than what they spend on clothing and also more than all other sectors. With a growth rate of over 15 per cent per year in the last decade, and this growth is likely to be sustained for decades to come on account of several factors, including the most obvious: the country’s population may touch the 1.2 billion mark by the time the next census is concluded in 2011, and then add another 150-odd million in the next 10 years alone! By 2020, the size of India’s health-care industry may well be over Rs 600,000 crore.
There are many unique characteristics of this sector. The oddest one is that it already has the presence of some of India’s largest and most entrepreneurial business groups, including Tata, Birla (almost all branches) and Ambani (both Mukesh and Anil). It also has some of the most visionary and dynamic entrepreneurs, including Dr Prathap Reddy of Apollo, Analjit Singh of Max and Dr Devi Shetty of Narayan Hrudyalaya (not to mention Malvinder and Shivinder Singh of Fortis). There are many centres of excellence in the public sector which include AIIMS (Delhi). There are many other exemplary institutions among a host of not-for-profit institutions, such as the CBCI-run St John’s in Bangalore. Yet, until now (and very surprisingly), the health-care sector has seen interest from the private sector more as a corporate social responsibility (CSR) activity rather than a high-potential business.
It is in this context that Fortis’ investment and acquisition of a significant stake in Parkway of Singapore is a potential game-changer. In one stroke, it has catapulted Fortis to becoming the largest private operator of hospital beds in Asia with over 10,000 beds spread across seven Asian countries. While financial analysts are more focused on the price paid for this investment, most are probably missing the many strategic advantages that Fortis can reap with this audacious move, and how it has set itself up to potentially become one of the largest and perhaps the most influential health-care services providers in the world by 2020.
The interest in the Indian health-care industry is likely to go up exponentially from now onwards. Firstly, the current incumbents (most notably Apollo, Max, Narayan and Care) are not likely to take this challenge lightly and will certainly accelerate their own growth plans. The interest from financial investors in India and overseas is already very high in this sector, and fortunately with practically no policy constraints on raising local and foreign capital, unlike in some other high-promise sectors such as retail and education, these incumbents will not find it difficult to raise the needed financial resources. Secondly, going by history, it is but a matter of time before one or more of the large Indian business houses announce their own mega-plans for entering this sector as yet one more major diversification.
India needs more than a million new hospital beds, distributed all across, right now. More millions of beds, entailing investments in hundreds of billions of dollars, will be needed in the coming decades. Fortis’ audacious move could well change the game for the Indian health-care sector!