Bangalore-based Manipal Health Enterprises (MHE), which runs the chain of Manipal Hospitals, had held back on its expansion plan during the recent slowdown. It is again looking to expand. Ranjan Pai, managing director and CEO of the Manipal Education & Medical Group, which owns MHE, oozes optimism in a conversation with Praveen Bose. Edited excerpts:
Many hospitals have been entering the market over the past five or six years and new business models are being experimented with by the new entrants. What is the impact of that on the older players?
Though many hospitals have come in over the past few years, everyone seems to have a good business going. The rate of growth for the hospital majors like Apollo, Fortis, Manipal has been in the range of 20-25 per cent annually over the past few years. New hospitals are not affecting the patient flows to old hospitals. Today, there are many boutique hospitals coming up in the city. But this is mainly because of their inability to find big enough land parcels. There is space for everybody and at every price point.
The US has been seeing the big hospitals losing ground, while there seems to be a growth of ambulatory services. What do we see here in India?
While many an expert has been talking of the model catching on and classic hospitals dying out, it is too early to come to such a conclusion. Most patients here want to stay back in the hospital for at least a day or two, even if it does not require them to stay. They believe hospitals will take care of them better and also because the chances of infections due to dust and grime would be much lower if one is in the hospital. It will take some time before mindsets change here. But there is space for every model to exist simultaneously in India. This is unlike the US, where ambulatory services seem to be booming while multi-speciality hospitals are on the wane. With minimal access surgery catching on, it has given a chance to hospitals to set up healthcare models that would be daycare hospitals, or which would have minimal number of beds.
What are the challenges faced by new hospitals entering the major cities today?
Real estate costs pose the biggest challenge to any hospital or hospital chain entering a new geography.
The prohibitive cost of real estate will not allow a newcomer to provide cost-effective services.
Do you foresee any foreign hospital chains entering or planning to enter India?
All these years, the only foreign hospital chain that has managed to enter India is ColumbiaAsia, which is doing well. Parkway, the Singapore-based healthcare chain, may be one player looking to enter India. I don’t see any other serious player seeking to enter. Healthcare is a very regional business, and more suitable for regional players, unlike many other businesses. But there’s space for more players. There are not enough hospital beds in the country today.
On manpower, what is the chief challenge you face?
Manpower costs have been rising the fastest, and that is true of all hospitals. We have been raising our charges by about 10 per cent a year. This is warranted by the increase in input costs. The biggest cost push has been manpower costs. We raised salaries of nurses and para-medical staff at an average of 15 per cent last year and this year, too, it could be similar. It’s the attrition at these levels that is most worrying. It’s not easy to find well-trained nurses and paramedical staff so easily. The new hospitals find them to be a ready and welltrained pool from which they can hire, and we find it difficult to retain them.
Do you plan any more facilities in Bangalore and elsewhere? How are you funding the expansion plans?
The group had raised Rs 110 crore from Kotak Private Equity in 2010. This, in addition to an amount of Rs 60 crore from the group’s internal accruals, is expected to help fund expansion plans. In all, we will be able to leverage about Rs 250 crore. In the next two to three years, the group could have about 1,000 beds in Bangalore from the current 850. This would require additional investment of Rs 80-100 crore. Many of these beds would be added at our secondary care facilities, including the Northside Hospital at Malleswaram, one at Jayanagar and another at Rajarajeshwari Nagar, all in Bangalore. We are also seeking to set up a 250-300 bed multi-speciality facility in north Bangalore, on the Bellary Road, near Yelahanka. It will cater to fast-developing northern Bangalore, which now has only one major hospital, the ColumbiaAsia in Hebbal. We are in talks with two builders. In another two to three years, this region is set to see a lot of development and we see it as a good opportunity. We are also looking at expanding in Mangalore, as hospitals are not coming up fast enough, and that is an opportunity for us.