Fortis deal not subject to ongoing investigations, says Manipal's Ranjan Pai

With the Fortis Healthcare announcement on demerger of its hospital business into Manipal Hospitals, the man in the spotlight is Ranjan Pai, chairman of Medical Education and Medical Group (MEMG), which has Manipal Hospitals under its fold. The hospitals owned by Ranjan Pai and backed by TPG, a leading global alternative asset firm, could well be en route to becoming the biggest healthcare player in India, overtaking Apollo Hospitals.

Provided of course, as Pai insists, the shareholders of Fortis Healthcare approve the deal. Speaking to Business Today, he spells out his vision, immediate priorities, the time that the deal will take to conclude and how the new entity has been ring-fenced from any of the investigations by SEBI and the SFIO, mostly related to its erstwhile promoters. Excerpts:

The spirit and intent behind the new deal seem good but it also seems one that will need multiple regulatory approvals with a lot many things that may need to be unwound. So, what is your estimate of how long this will all take?

We expect it all to end by the last quarter of next year.

What is the vehicle under which Manipal will list it and what will it be called?

It will be a new company. It is not yet formed but maybe we will call it Manipal Fortis, or something like that.

So, will all the hospitals eventually be Manipal hospitals?

We will jointly brand it as we may still want to use the Fortis name, but then we will discuss branding and how to position it over the next 12 months.

How do you ensure that the new entity is ring-fenced from the outcomes of the investigations and the liabilities from it?

That is the reason this is a bit more complicated structure. We do not know how long the investigations will continue in the old company (Fortis Healthcare) but we are not leaving any liability as we are taking at the debt and what Fortis Healthcare will own is 36 percent of SRL.

So, the deal is not contingent upon the outcome of the investigations?

It is not. That is the reason we wanted a sure shot agreement because we did not want to put any precondition and hence we came up with this structure, as advised by our lawyers. We understand, it is a little bit more complicated but we also wanted a surety of the deal and because a new entity is being created it will be ring-fenced from all the investigations. We have put a fair value on the company and is fair to all the shareholders and there is a lot of hard work to be done over the next few years.

You will now become the biggest in India, overtaking Apollo Hospitals, with some 45 hospitals, close to 8000 beds, and over Rs 5000 crore revenues in addition to the teaching hospital beds. Is this right?

We have to wait for this. While the Fortis board has recommended it, we should now let the Fortis shareholders understand the deal, feel comfortable and if they vote for it and approve it, only then, I think, we can talk of building a great company.

What about the Rs 3,900 crore that is to be invested now and also tell us about the Religare Health Trust that you will be acquiring. It holds all the hospital assets of Fortis and is listed in Singapore and will need to be de-listed there. Right?

Yes. That is correct. All those things had to be factored in. We are acquiring the hospitals at 22 to 24 times the EBITDA including Religare Health Trust. It is a fully priced deal.

Now that you may become the biggest hospital chain, with the caveat about getting the Fortis shareholders' approval first, what is your immediate priority and what is your vision?

The immediate priority is to integrate it well. The next couple of years are going to be challenging from that perspective. We have to make sure that all the employees, in both the entities, feel secure and comfortable working in this space. As for vision, we want to practice ethical health care. The industry has got a lot of flak over the last several years and as the largest player, we will have to ensure that ethical practices are run across the enterprise.