IHH CEO says top priority is to stablise and secure Fortis Healthcare

A: If you look at Fortis, it's a very eminent franchise. We are located in South India, in addition to having one hospital in Mumbai and one in Kolkata in a joint venture with Apollo (Hospitals). Fortis is spread mainly in North India. It's very complementary to our own operations in India. That’s why we have constantly chased Fortis.

Q: How confident are you about getting shareholder nod and what are your high and low points in the last three months of Fortis race?

A: We have come to a concluding stage and are confident that shareholders will accept the offer.  We always viewed Manipal-TPG, Munjals and KKR-backed Radiant Life Care as worthy financial investors and seasoned operators. So given the opportunity to participate in this process is a high point. The low point was when we lost out, now the high point obviously, our bid was approved by the board. We are indeed very honoured and privileged.

Q: Fortis is going through a difficult phase with various regulatory agencies probing alleged lapses of corporate laws. What kind of precautions have you taken to insulate yourself? Is there any walk away clause built into this deal – if in case a surprise liability throws up?
A: We are committed to the deal. All these inter-corporate deposits (ICDs), brand issues so on so forth, these have surfaced during the due-diligence process. The auditors have also qualified these things in audited financials. We have taken all of these into account. We will be working closely with regulatory authorities - to facilitate the investigation. We always comply with existing laws and regulations of the geographies we are in.

Q: You have mentioned that you have a 100 days turnaround plan for Fortis, could tell us some specifics of that plan?
A: The most important thing now is to make sure that the capital infusion is put in quickly because we need to stabilise and secure the ship, followed by the acquisition of RHT assets. On top of it, an additional Rs 1,300 crores are needed to shore up the capital to address any short and medium-term liquidity crunch the company is facing towards payment of salaries, vendors, and creditors. We are also looking at using our relations, our creditworthiness to renegotiate some of the Fortis loans. We are optimistic that we can chew out about 2-4 percent in terms of interest cost from the debt. We will also work towards improving the operational metrics of the group, given that in the last one year or so – the performance of Fortis is lagging behind its peers. I think we can improve the operating margins by 500-600 basis points. From procurement – we have long-term relationship with medical suppliers. We will be renegotiating supply contracts.

Q: What exactly is your plan with the diagnostic business SRL, will you keep it or will you sell it?
A: We are happy to give exit to PE investors in SRL. Once the offer is accepted (by shareholders) we will have further discussion on what to do with SRL, but our priority is to improve the operational metrics of the diagnostic business.

Q: You regard India has your home market, what makes you bullish on India, even when the healthcare sector here is going through a turbulent phase?
A: It’s a healthy sort of adjustment. Some of these externalities in terms of government-controlled measures brings entire industry towards transparent pricing procedures. Healthcare remains a sunshine industry. The long-term growth story is intact helped by rapidly growing middle-income segment. There will be increased demand for healthcare. We are long-term operators. We don’t have a short horizon, where we come in and after that, we flip. If you look at our track record, we haven’t sold any asset we acquired.