Fortis-Manipal deal: Meet Ranjan Pai, who is strong medicine for expansion

Illustration: Ajay Mohanty
Forty-five-year-old Ranjan Pai, chairman of the Manipal Education and Medical Group (MEMG), likes to keep a low profile but his business dealings often attract the headlines in the local southern media. The latest one, in which his hospital chain has bought out the troubled Fortis Healthcare’s hospitals business owned by the brothers Malvinder and Shivinder Singh, has earned him national headlines in a manner that reflects the challenges of this new acquisition.

 

The Rs 39-billion deal merging Fortis Healthcare with Manipal Hospitals Enterprises (MHEL), co-promoted by Pai and TPG Capital Asia, brings his hospital chain close to Chennai-headquartered leader Apollo Hospitals in terms of size.

 

For Pai, the deal is a big step in the creation of one of the largest healthcare players in the country and also gets Manipal listed on the stock markets.

 

But with legal issues surrounding Fortis Healthcare still to be cleared and the Delhi-based company’s minority shareholders objecting to the demerger of the hospitals business (Fortis Healthcare’s shares plunged 14 per cent on the news), Pai will have his work cut out in managing his new acquisition.

 

Bengaluru-based Pai is a self-made billionaire — net worth: $1.89 billion as on March 28, according to Forbes — the third generation of a business group founded by his grandfather T M A Pai, who opened India’s first privately-owned medical school in 1953.

 

The group was later trifurcated, after TMA Pai’s death in 1979 sparked a succession row (it was split between Ranjan Pai’s father, uncle and cousin). Pai’s hospital and education businesses, which he joined in early 2000 after he returned from the US, was the largest of them.

 

Pai obtained his MBBS degree from the family-owned Kasturba Medical College in Manipal and spent time in the US studying hospital administration at the University of Wisconsin. He worked at a children’s hospital in the US as well as a health insurance company before joining the family business in 2000 at the age of 28.

 

The group’s education vertical, which accounts nearly 60 per cent of the revenue, was split into two divisions: Manipal University and Manipal Universal Learning, a commercial venture that operates colleges in Malaysia, Antigua, Dubai and Nepal. The latter is what Ranjan Pai personally spearheads, while his father Ramdas Pai continues to lead Manipal University.

 

Initially, he was put in charge of the company’s Malaysian business, as managing director of Melaka Manipal Medical College, and lived there for five years while he set up a medical college.

 

His brainchild is a clinical services chain, Manipal Cure & Care (MCC), which is the Group’s foray into retail, aimed at changing the face of Indian retail healthcare. He also runs a stem cell research company, Stempeutics Research, which focuses on the field of regenerative medicines.

 

Since 2011, Pai has also been active as investor through his proprietary fund Aarin Capital, where he is a partner with T V Mohandas Pai, former CFO and board member of Infosys. Aarin Capital has so far infused $80 million into over 30 startups and other venture funds in India and abroad. He saw his fortunes grow in 2013 when he bought back stakes in his company formerly owned by Wipro founder Azim Premji and Infosys founder N R Narayana Murthy.

 

As the CEO of MEMG, insiders say, Pai has poured time and energy into new business initiatives, leading a financial restructuring of the company, corporatising the group by bringing in expert professionals at the management level and opening up a channel for private equity. Pai has overseen unprecedented growth for the organisation, which is now close to over Rs 105-110 billion.

 

Despite being in highly regulated sectors — healthcare and education — Manipal Hospital tried hard to become a pan-India player by growing organically. When this didn’t yield much success, and after TPG invested in MHEL, the strategy to grow through acquisitions took shape. The Fortis merger fits in with this vision.

 

Efforts to bring in Fortis’ hospital assets on board have been on for over a year now, said sources who were involved in the deal. The major issue was legal challenges around Fortis, which has been under a cloud as authorities investigate whether its founders siphoned funds out of the company.

 

Both Manipal Hospitals and Fortis Healthcare make a compelling strategic fit. “The acquisition offers great opportunities for our doctors and employees to expand their careers, and we look to bring in high quality ethical medical practices to all the communities that we serve. The merger also gives us the advantage of the economies of scale and, hence, better negotiating power on consumables, drugs and medical equipment,” said Pai in an email to Business Standard.

 

Fortis’s portfolio of 34 hospitals, with 4,685 beds across India and neighbouring countries would add to the 11 hospitals, with 2,973 beds (plus more than 3,400 beds in teaching hospitals) that Manipal operates mostly in southern India and Malaysia. The combined entity will have 45 hospitals with 7,658 beds and more than 4,200 doctors with a revenue of Rs 52.30 billion.

 

On the other side, the current market leader, Apollo Hospitals, has 71 hospitals with total bed capacity of 9,948 as on December 31, 2017. Revenue for 2016-17 was Rs 64.4 billion. The hospital chain is going to add 765 beds by 2022 at a cost of Rs 11.28 billion.

 

Insiders says that Pai’s style is to take decisions quickly, delegate and stay out of micro-management. He is also said to believe in medium- to long- term play rather than quarter-on-quarter target pressures, an outlook that he may struggle to maintain once the company is listed.

 

In his personal life, Pai, who is married with two children, is very much the cosmopolitan Indian. He has two pugs named after iconic screen villains Gabbar and Mogambo. His wife runs a spa and wellness resort dedicated to preventative care. He is a huge cricket fan and loves the music of classic pop-rock bands from the 1980s, the Police and Eagles being particular favourites.