Business Today Net Special

Interview: P.C. Reddy, Chairman, Apollo Hospitals Group

Dr Prathap C. Reddy, 78, pioneered corporate healthcare in India, and is now trying his hand at turning around ailing hospitals. Early September, Reddy finalised a deal to acquire half of the Kolkata-based Duncans Gleneagles hospital from the G.P. Goenka-promoted Duncans Industries. BT caught up with Dr Reddy in Chennai to find out more about his reasons for taking over Gleneagles and his future plans for the company.

Reddy of Apollo Hospitals Group

Q. Why did Apollo go for the Gleneagles acquisition and how much will Apollo Hospitals invest on this project?

A. We were attached with this project since its inception and we had even acquired land for the purpose. However, when Duncan (G.P. Goenka group) came in, we bowed out. With Duncan losing interest in the project, we agreed to take it up again. Our brand equity in this region is high, and I personally have been requested by several dignitaries to build a hospital in Kolkata.

The additional investment required to increase the bed capacity from 220 to 350 will be around Rs 40 crore. Apollo will be taking a 50 per cent equity (veering in the region of Rs 17-Rs 19 crore). A Rs 100 crore investment has already been made. We hope to have the hospital up and running by January 15, 2002.

What is your experience in turning around sick hospitals?

A. We have helped many small hospitals in the country by lending our technical expertise for a fee. Regarding sick hospitals, barring the hospital in Madurai (which we now own), we cannot claim any experience. We keep receiving offers from all quarters to buy out sick hospitals, but we can consider such proposals only if the hospital is free from legal hassles. If institutions offer hospitals on outright auction, then we can consider such proposals. The Gleneagles hospital is not sick. The project overran its cost and was never really operational.

What will be the business model?

A. Shareholder value is on the top of our mind. So we will avoid further dilution of equity (currently Rs 40 crore) unless the situation actually warrants it. Our debt equity ratio is at a comfortable 0.3 per cent, so we can raise adequate resources as and when we need it. For our immediate requirement we have our own funds of Rs 17 crore.

But I must emphasise that we will increasingly manage beds rather than own them. Arthur Anderson has conducted a study for us on how best we can lend our expertise. We have identified 200 plus hospitals across metropolitan cities and district headquarters, which will be owned by doctors, but for which we will provide professional healthcare.

We will provide training to people. Doctors will have access to our knowledge pool and provide quality healthcare services at every level, and we will also help doctors to upgrade their facilities. These hospitals will be called Apollo Clinics.

Can you elaborate on your plans of going global.

A. We have hospitals in Sri Lanka, Bangladesh, and Nepal. But we will be taking the managed care concept to the Middle East and the Gulf regions.

Outside of Hospital Corporation of America we are the only body to have an end-to-end expertise on healthcare and hospital management. We train manpower, provide them placements, construct hospitals as well as run them.

What are you doing on the healthcare insurance front?

A. We have made a request to the Insurance Regulatory and Development Authority saying that the private players must set aside a percentage for healthcare and medical insurance (of which one fourth should come from rural insurance). Today, no private player is talking about healthcare. We are working towards becoming a third party service provider which includes taking care of patients' requirements across our network of existing (now 200 ) hospitals. Many hospitals are joining us in this venture. We will ensure that a patient's bills are settled directly regardless of the location from where he may be taking treatment from (within the network).

Your vision for Apollo Hospitals.

A. We have set a target of achieving Rs 1,000 crore within three years, but we could well achieve it in two years. Our net profit should be around 12 to 14 per cent, though our services segment (HR placement and Hospital IT programmes) should generate much more.

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