Group reaping fruits of its labour from acquisition spree of past two years
[SINGAPORE] Having gone on an acquisition spree in the past two years, India's Fortis Healthcare is now turning its attention to reaping organic growth from the assets and launching new healthcare segments in existing markets.
Group chief executive Vishal Bali, in a recent interview with BT, said: "What we've done on the international side is enter some key geographies through the acquisitions, but we see tremendous opportunities in the organic growth behind each one of these acquisitions. And there's still work to be done in terms of expanding the verticals in these geographies.
"The way I see it, these are entry points. What we'll build is organic growth around them and we'll continue to seek other opportunities in terms of which other verticals we can enter in each one of these geographies."
New Delhi-based Fortis, backed by Indian billionaires Malvinder and Shivinder Singh, started in the hospital segment with its first hospital in 2001 in India. Since then, it has established four main health care pillars - primary care, day-care specialty, diagnostics as well as hospitals, which remains its major revenue generator.
As at August, it had 76 hospitals, more than 600 primary-care centres, 191 day-care specialty centres and over 230 diagnostic centres in 10 markets across the Asia Pacific; it is in this region that healthcare expenditure is expected to grow at a compound annual growth rate of 14 per cent from 2010 to US$920 billion (S$1.13 trillion) in 2015, said consulting firm Frost & Sullivan.
The desire to grow outside of its homeground explains why Fortis tried to take over hospital operator Parkway Holdings in 2010. It was a move that sparked its heated bidding war against Malaysia's Khazanah Nasional before the sovereign wealth fund made a $3.5 billion general offer and took Parkway private.
Since then, Parkway has gone on to become a consolidated part of dual-listed IHH Healthcare, which made its debut on the Bursa Malaysia and Singapore Exchange (SGX) in July.
Mr Bali said: "We were very clear right from that time that we saw an opportunity in Asia. We felt there was growing demand for health care in the region, and it would be good for us to move out of India and look at the opportunities within the Asia Pacific."
Fortis went on to snap up stakes in Hong Kong-based primary care provider Quality Healthcare Asia, Australia's Dental Corporation Holdings, the Hoan My hospital chain in Vietnam and Colombo's Lanka Hospitals, a government-owned entity, among others.
In Singapore, Fortis most recently launched a specialty colorectal hospital in Adam Road, acquiring the plot of land last year from First Real Estate Investment Trust; it also has an outpatient colorectal centre in Novena Specialist Centre. Aside from that, it bought a majority stake in Singapore-based outpatient diagnostic and imaging chain RadLink-Asia.
Fortis is also planning a listing on SGX via a business trust, Religare Health Trust (RHT), in its bid to become more asset-light and focus on its core business.
Mr Bali said: "What we've tried to build up is a good balance between developed and developing countries within the Fortis portfolio. At the same time, it provides us a good balance in terms of verticals."
Saying that Fortis's aspirations revolve around building up the other core verticals in markets where it is focused on just one or two core businesses, he added: "Whether you have a hospital in India or Singapore or Vietnam, the basic way you run a hospital remains the same. The difference would be the specialty you choose. The same thing is true for the other verticals. The replication strategy makes it that much easier for Fortis to enter into a new geography."
For instance, in Hong Kong, it has grown other verticals such as diagnostics, and is hoping to build a greenfield hospital, having bid for two hospital sites which the government has released via tender. (Raffles Medical Group is also bidding for one of the sites in Aberdeen).
Fortis is also doing day-care specialty work in India, in areas such as endocrinology, leveraging on experience gathered from its acquisitions.
"As the world's healthcare is evolving, a lot of it is moving out of hospitals into outpatient services or into day-care services," he added.
Fortis plans to expand its colorectal and diagnostics business here, develop its dentistry network in Australia and New Zealand, add more hospitals to its portfolio in Vietnam and extend its diagnostics network in the Middle East.
Talk of Fortis looking to list a trust has been going on since earlier this year; the trust received a conditional eligibility-to-list on SGX back in May, though the preliminary prospectus was lodged with the Monetary Authority of Singapore only late last month.
The document showed that Fortis will own 28 per cent of the units in RHT after the listing.
RHT is looking to raise some $511 million through the flotation. Located across India, RHT's initial portfolio will consist of 11 clinical establishments, two hospitals managed and operated by the trust and four greenfield clinical establishments.