It's a calculated risk, but we'll turn Fortis around: IHH Healthcare CEO

In a Q&A, Tan See Leng says IHH can make Fortis Hospital a centre of excellence, a one-stop multi-disciplinary type of set-up that offers comprehensive treatment

IHH Healthcare Bhd, which runs hospitals across Malaysia, Singapore, Turkey and India, has been pursuing the acquisition of Fortis Healthcare for almost 18 months. The Malaysian group lost out in earlier bids, but bagged the asset after a long-drawn bidding war. Dr Tan See Leng, IHH's group CEO spells out the company plans in an interaction with Aneesh Phadnis. Excerpts.

How come the price offered by IHH now (Rs 170 per share) is lower than the last bid?

We have looked at Fortis Healthcare's audited financial statements, and the auditor qualifications. We have taken into account all the findings of due diligence and all that has come in public, to decide on the price. We thought this was a fair price. Also, we are answerable to our shareholders.

You have said that IHH has a 100-day revival plan for Fortis Healthcare. Can you tell us what it is?

The most urgent and pressing issue is to stabilise and secure the asset (Fortis).  Of our Rs 40 billion investment, Rs 26.50 billion would go towards acquisition of assets of RHT and the remaining Rs 13.50 billion will be used as working capital and for capital expenditure and upgrade. With the funding in place we can focus on acquiring doctors and improving operations at each of the hospital.

Is there any thing more in the 100-day plan?

I think we could look at identifying and evaluating some of the related party transactions and  also at how we can leverage our banking relationships to optimise Fortis' debt-funding costs. We can potentially looking at savings of 2-4 per cent in financing costs and improving operational parameters. We are looking at bringing the company back to what it was before, because today, Fortis' margins trail those of competitors both in the hospital and the lab space.

What does the Fortis win mean to you? Aren't you worried about all its controversies?

We are very excited. Our journey has just begun. We have detailed plans and laid out milestones and yardsticks where we will measure improvements. We know there is risk. Once we get into asset there will be more things we will uncover. I am pretty sure of it. But given the length of time and discipline we have put for due diligence we mitigated a large part of it. I think with the new board in place, transparency in bid process and disclosures that have been put. I think we have taken a calculated risk. We are confident of turning around the asset.

Are you confident of support from institutional shareholders?

Our investment proposal is simple and easy to understand. It can be executed in a short period of time which is a critical issue. We are also in dialogue with stakeholders and shareholder in Fortis.

IHH considers India as a home market. What is your growth plan in India?

India's vast clinical talent is a resource and can serve as a launch pad for medical tourism. We believe we can organise Fortis Hospital into a centre of excellence, a one-stop multi-disciplinary type of set-up that offers comprehensive treatment.