By 2014, the Narayana Hrudayalaya Hospitals will add four more facilities to its chain of 16. That translates into a bed strength of 14,000. The man overseeing the expansion is Ashutosh Raghuvanshi, Group CEO. He was made the vice-chairman three years ago and was being groomed to take over as CEO. Praveen Bose caught up with him for a chat at the Narayana Health City, a multi-speciality facility.
Given the pace of expansion that Apollo and Fortis are planning across India, how do you view the competition?
We don’t look at the classical corporate hospital as competition. They cater to the higher segment of the population. Competition is necessary and there is a scarcity of hospitals in the country. Even if 100 hospitals are added each year for the next 10 years, we will fall short of our requirements. And, in healthcare, competition is in terms of service.
Narayana Hrudayalaya talked of aggressive expansion plans at the time of raising Rs 400 crore from AIG and JP Morgan three years ago. There were talks of health cities at various places, but except for the cancer care centre in Bangalore and some progress in Ahmedabad and Jaipur, there has not been much to show. Are you reworking your plans?
We are not modifying our plans. All new projects take time. Moreover, all our projects are large, which require time for good planning and implementation. And, larger projects have a longer gestation periods. In addition to the new hospitals in India, we are going ahead with our project at Cayman Islands. In phase I of the project, we are building a cardiac centre, which should be functional soon. In phase II, we plan to build a multi-speciality hospital.
From being a focussed cardiac-care chain, you have forayed into cancer care and now expanding into neighbourhood clinics. How are the revenues from these two, large health cities and clinics, shaping up? How will you handle this expansion?
All disciplines in healthcare are inter linked. With several disciplines, revenues will only grow. Resources are shared and utilisation is better. Hence, this has helped to cut costs. To handle our growth, we are building up good teams. A lot of our expansion calls for better management bandwidth, which we are building. Last year, we hired five from the IIMs, and this year we hired four. We have one team that is into evaluating projects.
Your founder chairman, Dr Devi Shetty, has been talking of the need for more investments in healthcare as there is not much coming from the Central government, and PE players are looking at handsome returns. What are your views?
Investments from conventional sources are still high in the healthcare sector. The PE investors expect very fast and very high returns. This is not possible in a sector such as healthcare, which has long gestation periods and very low rates of return. In such a scenario, an alternative mode of investment, suitable for the sector, is the real estate investment trust (REIT) companies which could have big land banks and have long-term interests and are hoping for assured long-term returns. Another one could be that of companies with strategic interests that could become strategic investors in hospitals or healthcare chains. These may include companies that are into manufacturing healthcare equipment and devices or some healthcare provider from the US. There are many US healthcare providers looking to investing in India. We are exploring the possibility of attracting such investments.
You said you will add four more facilities shortly. How will you finance the expansion?
We believe in having a very low-debt component. If not, the outgo on interest will be quite significant. Three years ago, there was no debt. Going forward, as we invest more, the debt component will go up. It may ultimately be in a ratio of 1:1. We plan to invest $220 million (Rs 1,000 crore) over the next two to three years.
How is the expansion being phased out?
In Bangalore, our heart hospital has 900 beds, cancer care has 2,500 and of this about 500 beds are operational. Cancer care is growing as the demand grows.
We have an orthopedic hospital, Sparsh, and an eye hospital. Ahmedabad Health City will also be a large one. Its phase I, with 350 beds, is ready and running. We will add 7,000 beds in three years. In 2014, we should be about 14,000-bed strong. We are trying to fund a lot of our expansion from within. We are also in talks with possible partners for additional funding, and are yet to choose the right one.
