Is developing a greenfield project in Mumbai, reportedly looking at Sterling Hospitals buy.
Had Fortis Healthcare’s bid for Parkway Holdings gone through last year, it would have instantaneously given the promoters, Malvinder Mohan and Shivinder Mohan Singh, a strong foothold in Southeast Asia. That didn’t happen. Instead, Fortis is now putting together its pan-Asia network piece-by-piece, with the latest being an acquisition in Vietnam.
But with Malaysia’s sovereign wealth fund, Khazanah, remaining in control of one of the largest private healthcare providers in this region, Parkway Pantai, as the entity is now known after reorganisation, is turning the tables. It is readying to up the ante in India.
Although Parkway Pantai’s chairman Mohammed Azlan Hashim declined to confirm or deny reports of the healthcare chain being involved in the purchase of Ahmedabad-based Sterling Hospitals, instead merely saying the reports were “highly speculative”, the Singapore-based firm is exploring organic and inorganic growth opportunities in the subcontinent.
Private equity fund Actis has put its stake, amounting to about 80 per cent, in the Gujarat-focused hospital chain on the block, with the sale’s enterprise value understood to be pegged at Rs 450-500 crore. The healthcare entity has four multi-specality tertiary care hospitals with over 1,000 beds across Ahmedabad, Vadodara, Rajkot and Bhavnagar. Additionally, it has two secondary care facilities in Adipur and the Mundra special economic zone and two satellite centres at Kalol and Mehsana. Actis invested in Sterling in 2006.
“For us, I think, if you look at the overall strategy for India, we already have a very strong partner in India, that is the Apollo Group. I think where we see ourselves value-adding would be in areas where Apollo Hospitals is either under-represented or there is a gap for the Parkway Pantai group to value-add in that particular space,” Parkway Pantai’s group chief executive officer and managing director Tan See Leng said.
In India, Parkway runs the 425-bedded Apollo Gleneagles Hospital in Kolkata through a joint venture (JV) with the Apollo Group of Hospitals. Khazanah holds a small stake in the Prathap C Reddy-led healthcare entity.
At the same time, Parkway Pantai is developing a greenfield project in Mumbai in partnership with Prakash Khubchandani, where operations are likely to begin late next year, and also provides hospital management and consultancy to Delhi’s GM Modi hospital, part of B K Modi’s Spice Global group.
“Our growth strategy remains two-pronged. One is organic greenfield growth that can sometimes take a long time; the other thing is inorganic, brownfield type of acquisitions. The HMAs (hospital management agreements) provide us with a fairly lower-risk way of going into a particular market and understanding that market. Say, for instance in Delhi, (where) we have not had a foothold before, this gives us a very good route and stepping stone to move into that market,” explained Tan.
With HMAs usually signed for a period of 10 years, these arrangements allow Parkway Pantai to assess the assets under management, understand the market and subsequently, make a decision. Typically, HMAs have an embedded call option, Tan said, where after a point Parkway Pantai can “start to buy or take up equity in that particular asset.”
“And sometimes, in a market that we are familiar with, we will go in and straight away do the JV in terms of a greenfield (project). So, there is a certain sort of performance matrix that we put these things in, and if it fits our overall strategic investment initiatives and strategies, we will then go one of those two routes,” he added.
However, Parkway Pantai’s enthusiasm for the Indian market may be curbed by the fact that the country continues to have a low-penetration of private healthcare insurance, given the size of the population.
“In our model, because it is a private-sector model, we do not depend on government subventions or subsidies or concessions, we have to go where there potential to make economic sense. We are funded by shareholders and we have to ensure that we can make a decent return for our shareholders. So, we are waiting for that (private healthcare insurance) area to open up. When that opens up, we will be able to go in and reap that in a big way,” said Tan.
In the meanwhile, though, the healthcare major is working to create a pan-Asian platform for the training of nurses and allied healthcare support professionals, and is in the process of creating a common road-map.
“You can have the best hardware, you can have the best infrastructure in place, the most up-to-date and advanced medical equipment, but it is really the softer skills — the competency and so on, of the staff — that we need to train,” Tan said.
"The significant hurdles that we face are really in terms of credentialing, accreditation, privileging and also the access of these people we train to different countries," he added.
