Religare’s CMD talks about the deals for the Singh brothers of Ranbaxy and how clever structuring of deals, like on loss-making Bollywood film Rann, ensures there’s no downside for the group.
Sunil Godhwani, the chairman and managing director of Religare, takes charge right away. “Are you a non-vegetarian? Become a vegetarian for today. Let me place the orders. I know the food here; who’s the chef during the day, and who’s at night.” La Piazza, the Italian restaurant at the Hyatt, is a quiet place till Godhwani swaggers in. The sleeves of his white shirt are rolled up, and the blue tie hangs a little lose from his neck. Mozzarella cheese with tomatoes, a La Piazza & margarita pizza and pasta — he places the order without bothering to open the menu card. All is not lost for me: I ask for watermelon juice; Godhwani wants Coke, writes Bhupesh Bhandari.
Godhwani shoots straight from the hip. There is no trace of formality in what he says, either to me or the restaurant staff. He has been tutored at length by his public relations advisors for our meeting, but throws all caution to wind and talks freely from the word go. Talking to him is like a boxing match — you throw a punch at him and he throws two back at you.
The Singh brothers, Malvinder and Shivinder, nine years ago asked Godhwani to take charge of their non-banking finance company called Fortis. The Godhwanis, who were into leather accessories, were known to the Singhs for at least two generations — hence the offer. Godhwani has turned tiny Fortis into sprawling Religare. What is the difference you have seen, I ask, between the two generations of the Singh family? “Dr Parvinder Singh,” says Godhwani, “had the great ability to judge people in a matter of minutes. His sons (M&S) too have learnt a lot; but their greatest advantage is their age (the two are in their 30s).”
The story of how the brothers sold Ranbaxy to Daiichi Sankyo in 2008 has come out in dribs and drabs. It was Godhwani who closed the deal for them. I prod him to tell me the real story. The intent to sell, says he, came about when Ranbaxy wanted to acquire some assets of Merck. Lenders began to impose, says he as we cut into the cheese, very restrictive conditions. “That is when realisation sunk in that we need a big brother to grow,” says he. In other words, the Singhs would induct a strategic partner and hold a minority stake. They resisted when suitors wanted their full stake, but were convinced by Godhwani to sell out. There were three multinational pharmaceutical companies in the race; the Singhs sold to Daiichi, though it wasn’t the highest bidder. “The deal had to be closed within the deadline,” explains Godhwani. The timing of the deal, of course, was perfect: The Ranbaxy shares have never reached those heights. “We thought the deal was undervalued,” says Godhwani.
After that, Godhwani struck two more acquisition deals for the Singhs. The first was Wockhardt Hospitals from Habil Khorakiwala and the other was Parkway Hospitals from TPG Capital. The pizza has arrived. The crust is thin, cheese has been used in moderation and the toppings are light. Good because there’s a long day at work ahead. Both the deals, says Godhwani, weren’t easy. Why was Wockhardt difficult, I ask, because the group was known to have put the hospitals on the block? The hospitals, says Godhwani, were owned privately by Khorakiwala and not by Wockhardt. And since it was Wockhardt that was strapped for cash and not Khorakiwala, he was not negotiating from a weak position. So, the negotiations were led by Khorakiwala. This meant that Godhwani had to drive it personally, and could not send his team. The two met secretly at various places to keep rivals away.
Parkway was ballsy but complex, says Godhwani, because it was an overseas transaction. But the acceptance of the new owner has been easy, he claims, because the staff was used to a private equity fund as an owner (TPG Capital) and is now happy to be led by people who understand healthcare. “Funds look at IRR (internal rate of return) alone, while an investor like us would look at long-term value,” says Godhwani. Interestingly, Parkway is putting up a hospital in Kolkata in collaboration with the Reddys of Apollo Hospitals, arch rivals of the Singhs in India. “How much of Parkway’s costs can you knock off with your expertise in running a hospital chain (Fortis) in an emerging market like India,” I ask. Godhwani says the numbers haven’t been worked out, though cost arbitrage could happen in the future.
Godhwani orders one more pizza. He exercises an hour every morning, so does not look too worried about the calories. Religare had recently invested in a film called Rann. It was made by Ram Gopal Varma and had Amitabh Bachchan in the lead; yet it bombed. Why? Godhwani says Religare did not lose any money in the venture — it had lent money to Varma on the condition that he will return it with interest before the film gets released. Moreover, it gave Godhwani great mileage. His business associates all got to meet Bachchan at the premier of the film in Delhi; the aging superstar comes frequently for Religare events now. The investment, in other words, has been fully recovered. “When will you make a film with Katrina Kaif,” I ask. “You will have to wait, there’s a long queue,” he tells me.
Godhwani says he makes sure there is no downside to such investments. Religare’s 44 per cent in life insurer Religare Aegon, for instance, is guaranteed an IRR of 12 per cent at the time of exit by Aegon. If there is an IPO and the listing gains are less than that, Aegon will make up the deficit. “It is guaranteed not with a contract, but with a letter of credit,” he says. But he admits that his cost of funds is high — between 8.5 per cent and 12.5 per cent, depending on the tenure. To own a bank is therefore crucial for him. “Can you get me one,” Godhwani asks. I let it pass.
He no longer looks at weekly productivity numbers, Godhwani says. That task he has delegated to his CEOs. He meets most of them every week and tries to get a sense of the business from their body language. One of the CEOs is his brother — Sanjay Godhwani of Religare Aviation. But that’s hardly enough to push him on the defensive. He was brought in by M&S “but being my brother gives him no advantage. Why don’t you talk to him?”
Godhwani says he is not the brightest fellow around in Religare, but his attempt is to get the best person for the job. The image of Religare as a workplace has improved after M&S decided to step down from the board of directors, he says. “Employee morale is up 25 to 30 per cent. They now know it is their company and they can reach the top.” There are several in Religare who are paid more than him. “I am not a limiting factor,” he says. “I am not in it for money.” In that case, I tell him, let us switch jobs. “I won’t be able to do your job because it requires one to listen. I might interrupt and tell the interviewee how to do business,” he says.
He refuses dessert but orders coffee, for both of us of course. He adds three sugar cubes to his cup. “One may die half an hour earlier (because of diabetes), but look at how much more one enjoys life,” he says. You could challenge the logic, but Godhwani says it with great conviction. Like everything else.