Q&A: Rahul Khosla, Max Healthcare

In an email interview, Max India Limited managing director Rahul Khosla, who is co-chairman of the operational task force of Max Healthcare, tells Joe C Mathew about the significance of Max-Life Healthcare deal. Edited excerpts:

What does this investment mean for Max Healthcare? To what extent will it help Max Healthcare avoid high cost funds?
This investment, which is the largest-ever FDI in healthcare in India, at an attractive valuation of 33 times its FY12 EBIDTA, to a like-minded long-term investor will provide Max Healthcare funds during a high growth phase where its doubling capacity to 1,900 beds and also provide enough headroom to continue expanding over the next few years. This is an all-cash deal, and of the proceeds of Rs 516 crore that Max Healthcare will get, roughly about one-third will be utilised to retire debt and switch to lower cost funds. Essentially, it will make Max Healthcares balance sheet much stronger.

What are the synergistic advantages of roping in a hospital provider as significant equity partner?
The deal will also provide opportunity for best practice transfer from Life Healthcare, which is known for its expertise in areas such as ‘Informatics’, ‘Cost Management’ & ‘HR Practices’. They are the second largest private hospital operators in South Africa currently operating 63 facilities with 8322 beds in South Africa and Botswana.

Max is seen as a North Indian player. Will the current infusion of funds follow a change in this focus?
We want to be the highest quality provider, not necessarily the largest provider. NCR region has the highest per capita income and highest healthcare spend across the entire nation. We believe established brand presence helps drive better performance. It still has a shortage of quality beds with 4,000 quality beds in the region against a requirement 5000 beds to 10,000. We aim to venture out with new facilities in North India itself in the foreseeable future.

What is the current debt burden of Max Healthcare?
It is currently in the range of Rs 900 crore but will get reduced after this deal. We plan to bring it to a comfortable 1:1 debt equity level.

Is the recent change in the leadership of Max Healthcare in any way linked to the new partnership and joint growth plans?
These developments are completely unrelated.