IHH wins Fortis bid — Meet CEO Tan See Leng, a bus timekeeper's son key to Malaysian co's rise to the top

Analysts say the approval is now a mere formality as the board’s choice may not face backlash from majority shareholders unlike previous occasions.

To be sure, winning the Fortis race wasn’t an easy feat for IHH.

Tan and his team members in India, Singapore and Malaysia have been working tirelessly behind the scenes for last 16 months even as Fortis looked to have slipped out of their hands twice in a keenly contested race.

IHH came close at striking a deal with Fortis towards the end of last year, but were held back worried about the implications of the legal battle between Japanese drug maker Daiichi Sankyo and the Singh brothers, the erstwhile promoters of Fortis.

In those 16 months, Fortis fortunes have swung widely. The company rapidly slide from being a formidable Indian healthcare operator to a beleaguered one, much of it was due to internal problems associated with group’s promoters and some of their transgressions, coupled with tough external environment that saw government regulating prices of stents and knee implants.

Despite those challenges Fortis acquisition helps IHH to solidify its position in India. Tan calls India as the fourth home market after Malaysia, Singapore and Turkey.

Currently, IHH has 9 hospitals with approximately 1,192 operating beds in India.

If the deal goes through, IHH will be the second-largest private healthcare provider in India after Apollo Hospitals with operational bed capacity rising to 5877. In terms of share of revenue, IHH’s exposure in India is expected to increase to 24% from 6% currently.

Hands-on leader

A person who worked under Tan on anonymity called him as “hands-on leader” and loves taking up challenges.

True to that adage – Tan without resting on laurels immediately jumped into action drawing-up a 100 days turnaround plan for Fortis.

The plan entails quickly deploying promised funds of Rs 4,000 crore to address working capital requirements and fund Religare Health Trust (RHT) acquisition.

RHT listed on Singapore stock exchange owns hospital properties – which are rented out to Fortis for service fee. RHT acquisition allows Fortis to save around Rs 400 crore per annum.

Tan said he is also looking to save least 2-4 percent on interest costs through refinancing Fortis loans. Tan also believes that there is scope for improving operating margins of Fortis.

“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," Tan said.

Fortis posted a net loss of Rs 932 crore in Q4FY18, largely due to provisions and impairments, but the company's operational performance has been under pressure as well.

The earnings before interest, tax, depreciation and amortisation (EBITDA) margin of the company's hospital business, which constitutes four-fifths of its revenue of Rs 4,537 crore, has been flat at 12.1 percent.

The diagnostics business saw a sharp drop in EBITDA margin from around 20 percent a year ago to 15.6 percent in Q4FY18.

There has also been a steady drop in occupancy levels. In the March quarter, occupancy levels dropped to 65 percent, the lowest in the company's recent history.

“I think we can improve the operating margins by 500-600 basis points.” Tan said.

India, so far remained a tough market for IHH. The acquisitions have yet to deliver the desired results. Analysts said IHH paid a premium for the acquisitions of Continental Hospitals (for Rs 300 crore) and Global Hospitals (Rs 1,300 crore) in 2015.

Tan declined to provide EBITDA margins of existing India business. He says it's too early to comment on these acquisitions and they need time to settle down.

"We have also been strengthening and deepening our management bench strength in India. I think one of the key things about such a great, deep, and long learning curve is that during the process of learning what to do, I think we have also learned the more important lesson of what not to do," Tan said in call to analysts.

IHH appointed Ajay Bakshi in May to run its India operations. Bakshi, a neurosurgeon by training was former CEO of large hospital chains like Max Healthcare and Manipal Hospitals.

From tutor to CEO

A medical doctor by training – Tan, a Singaporean of Chinese descent is the only child of a bus timekeeper and housewife.

Given his humble family background Tan worked hard to put himself through medical school.

In an interview to the Peak Magazine in 2013 - Tan said he tutored junior-college students in mathematics, biology, physics and chemistry to help pay for his annual 3,000 Singapore dollars fees.

“It helped pay for the books, and I could even buy a nice stethoscope,” he said.

Tan turned into an entrepreneur at the age of 27 and founded a private primary healthcare group called Healthway Medical Group with three friends, one of whom became his wife.

He developed Healthway into Singapore’s second largest primary healthcare chain before selling the company to British United Provident Association for an undisclosed sum.

Following the sale - Tan in 2004 was invited by Lim Cheok Peng, then head of Parkway Holdings, to run the operations of Mount Elizabeth Hospital.

Peng, a cardiologist, was widely credited for Parkway transformation from a small cottage hospital into the healthcare empire.

Tan quickly rose through the ranks to become Parkway CEO in April 2010.

The next year, after the group's restructuring, Tan took over as group CEO and managing director of Parkway Pantai, an indirect wholly-owned subsidiary of IHH.

Under his watch, the average revenue per in-patient climbed steadily for Parkway Pantai's Singapore and Malaysian hospitals from 2012 to 2015.

The father of three, Tan's two older children are studying medicine. A lover of good food and wines and single malts, Tan loves cooking for his family and friends at his home.