Prince Mathews Thomas Moneycontrol News
Manipal Education and Medical Group promoter Ranjan Pai has an eye for good deals. Take for instance the investment by his fund Aarin Capital in start-up Byju’s in 2012.
Pai was in Manipal, staying at a hotel where jam packed coaching classes were being conducted. Impressed, Pai met the teacher behind the coaching classes. It was Byju Raveendran. In no time, Pai had advised Raveendran to scale his business by going digital, and also offered him capital to do so.
Raveendran agreed. By 2013, Aarin Capital invested Rs 50 crore for a 26 per cent stake in Byju’s.
Pai exited the business – barring a minuscule stake - in 2016 with a 10-fold return. Byju’s, which now has a considerable digital presence, is on its way to become a start-up unicorn.
Aarin Capital, which Pai launched along with close associate Mohandas Pai, has a portfolio of 13 companies across education, bio-pharmaceuticals, hospitality and home design.
It’s not that only Pai has bet on other entrepreneurs. Others too have bet on him, and made money.
Azim Premji’s investment fund PremjiInvest was so impressed that it made a second round of investment in Pai’s education business, within two years of exiting from its first buy.
The interest comes from Pai’s credible track record since joining the family business, which started with a small primary school founded by his grandfather TMA Pai in Manipal in 1942. Today, Pai’s business empire straddles across education, healthcare and stem cell research, and includes six colleges and 16 hospitals. Forbes India puts his wealth at $1.89 billion.
Biggest challenge
All of Pai’s experience in turning a family business into a conglomerate will now be tested. The 45-year-old Pai has just made the biggest deal of his career.
Along with TPG, which in 2015 invested USD 150 million in Pai’s healthcare business, the billionaire entrepreneur has announced the acquisition of Fortis Healthcare. The deal will also include Fortis’s diagnostics arm SRL Diagnostics.
Manipal Hospitals and TPG will be investing Rs 3,900 crore, of which Pai’s company will put in Rs 2,100 crore.
The deal will make Pai the king of India’s healthcare business. But it will not be an easy crown to wear.
Fortis, which was founded by Malvinder and Shivinder Singh, comes with a troubled legacy. After going international in their healthcare strategy, the Singh brothers had a rethink. Later, the two were forced to pledge their shares to raise money to pay off debt at the holding company. And the continued complications post the sale of Ranbaxy Laboratories to Daiichi Sankyo, persistently cast a shadow on Fortis’s operations.
It didn’t help that there were allegations of the Singh brothers diverting money out of Fortis for personal use. The company auditor, Deloitte Haskins & Sells, even refused to approve the company’s financial results. An internal probe is on.
Apart from making sure that these probes are undertaken objectively, Pai will have to also clean the company’s books to bring back the confidence among investors. Fortis Healthcare’s scrip has been down nearly 30 percent in a year, compared to the near 14 per cent rise in the BSE Sensex over the same period.
Top on Pai’s priority will be to ensure that the merger, and subsequent integration of operations is smooth. But as Fortis Healthcare CEO Bhavdeep Singh pointed out, mergers can turn out to be a nightmare. Stressing the point that mergers are not assured of succeeding on the day they are inked, Singh pointed out that the deal between media giants Time Warner and AOL. “The merger turned out to be the biggest disaster,” Singh said of the proposed $165 billion deal in 2000.
Many things went wrong with that deal. The cultures of the two companies varied, the deal was followed by a dot com bust and the economy went on a recession mode.
In the case of Manipal and Fortis, there are some obvious synergies. Pai’s company is new to the northern markets, which is home to Fortis. While Manipal specializes in neurology and oncology, Fortis has a considerable experience in cardiac and transplants.
But there are differences too. Industry watchers point out reports on patients alleging overcharge by Fortis hospitals.
The seasoned investor that Pai is, he would have checked all the boxes before making his move to buy Fortis Healthcare. The next 12 months will be crucial.
Who is Ranjan Pai?
— Son of Ramdas Pai, a doctor of medicine. Grandfather TMA Pai had started the family business with a primary school in Manipal
— As a teenager, he failed to get admission in the family’s Kasturba Medical College. The setback spurred him to prove himself
— His Manipal University has more than 100,000 students
— He is the process of getting license to start health insurance services
— Had bought his wife's catering business
— Has two daughters
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