Capital-hungry businesses will slow down a bit

By Malvinder Mohan Singh

I have always believed in being a contrarian. Everybody has his own views on life. In the current economic condition, which many people are still calling the India growth story, there is a good opportunity to make investments. Clearly, this is not the most attractive environment to start off a series of pretty capital-intensive businesses, as there will be long gestation periods. But for those who have a strong business edge and comfortable cash flows, this is a great time to continue to make investments, because whatever reduction or slowness has happened today is not going to last forever and it will pick up. Once it picks up, the growth, consumption and opportunity will all open up. But when you start making investments, it will become expensive. So, those who have the ability to make investments today and can hold and keep investing through this challenging period will emerge winners.

No immediate resolution
To make the Indian success story more substantial, we need to address problems like high borrowing cost, inflation, liquidity in the market and also work on reforms in economic policies. Market growth will be there, but it will certainly be less than what it has been in the past and where it could have been today. And when you have consistent, stable, growth-oriented policies which are continuously getting implemented, it will encourage people to make additional investments-whether Indian or foreign investments.

India has the inherent strength of having a large domestic economy and, therefore, it keeps you at a certain minimum threshold of growth, which is an advantage. However, in areas like exports and imports, we are linked globally. As the Indian economy grows, the interdependence with the global economy will also increase. So, when the US and Europe register slow growth, there will be an impact here. Today, America is hovering at around a 0-2 percent growth rate. In Europe, I see continued challenges for the next few years, so there will be no immediate resolution there. The major thrust in what happened in those economies will probably be better felt and known based on the policies that take shape post the elections.

Sectoral opportunities
We can safely say that businesses with large capital requirements and long gestation projects will probably slow down a little bit. Entrepreneurs can leverage skill sets and intangibles like knowledge and business capability, which do not require huge capital. Anything which is India-centric from a consumption perspective would do well, because as the economy and people’s aspirations grow, they would want to spend more money. There are opportunities in the sectors which are linked to the government in terms of projects and tenders. I also see the services sector doing extremely well. The Indian customer always wants high quality products at competitive prices. Luckily for us, the healthcare segment is growing exponentially at 15 percent and will grow at this rate. There is a huge scope of new facilities coming in, for which the market has a demand. However, healthcare needs to grow more, whether it is in the private or the public sector. In the private sector, the market is fragmented and large but not consoidated. Even Fortis today, being the largest healthcare player, has single-digit market share. The real opportunity is across the country in different segments-family care, diagnostics, daycare specialties, medium- and large-sized hospitals, etc. Much investment is required across the sector. Of course, the industry recognizes us and is looking at making more investments. We will see more people coming into our sector, while the government should encourage and enable it to grow. In many of our other emerging markets, there is still a huge demand-supply gap, which will continue over the next few years. This opens opportunities for companies like ours to make investments and look at strong growth.

The road ahead
We are now launching a new health insurance business and have made huge investments in expanding our healthcare venture in India as well as in the international market. It’s fortunate that we have been able to think out-of-the-box and execute our plans while making strategic investments. It’s been 11 years now, and today we are among the largest players in the healthcare in the pan Asia-Pacific market. We grew by more than double this year. This growth is reflected in our CAGR and EBITDA which, over the last five years, has been over 15 percent. Till two years ago, we were in the hospitals business in India and today we are a vertically integrated healthcare company across the larger pan Asia-Pacific market.

We have substantially transformed the business with strategic initiatives and acquisitions over the last few years. Today, we are a company that is looking at healthcare, a local business across multiple markets. We want to take advantage of our capability to the emerging and developed markets within the Asia-Pacific market. We have businesses in primary healthcare and diagnostics. We also have secondary hospitals which function with multi-specialty work.

The execution challenge

In the next three to five years, we will emerge as the leader of the healthcare segment in Asia. We are trying to create a vertical model for healthcare. Our goals are in place, we just have to execute them. Execution, however, is one of the biggest challenges in this sector. There is a dearth of right people needed for executing plans. This sector needs better doctors, nurses and staff to execute the plan. But with our greater reach and brand name, we are attracting the best talent in India. It is happening slowly, but there is a long road ahead. We need to continue to develop, nurture, attract and retain the best talent in medical management. If we get that right, things will be hunky-dory.

(As told to Avanish Tiwary )