Late Thursday based on the assessment made by the Independent Expert Advisory Committee, the Fortis Healthcare Ltd board – five out of eight directors voted in favour — gave nod to the offer made by Anand Burman and Sunil Munjal combine for stake in the company’s hospital and diagnostic chain. “We made a bid for an asset and we won that,” said Burman, Chairman, Dabur. While Munjal feels that “Fortis meets all the criteria which we were looking for to get into this segment...at this moment, it is in need for attention both in terms of liquidity and reputation. More than liquidity there is a need to repair the reputational damage that has taken place.” In conversation with BusinessLine the two shared their strategy ahead, why they were believed they were the best. Excerpts:
You now need only two approvals — one from the Competition Commission of India and other from shareholders. You think it will be a smooth sail?
Munjal : That’s right, we don’t need any other approval and we think this was another factor that worked in our favour. We were the only one where the offer was completely binding. There is a certainty in execution.
Once we handed over the offer, we were sure that there was no coming back. Now, it is up to the company as it has to get its shareholders’ nod. Once that comes, our money will automatically come in.
Also in our case, the liquidity crisis that the company faces will be addressed quickly. One, of course, the overall time required for us to put in money was the shortest, there is 45 days or less required.
Second, I think the banks that were pressing the company. They know the record of our companies. They are more than happy and willing to support any initiative that we are involved in.
Burman: I think the system would benefit by our getting involved. In the long-term, the set of ideas and management practices outside healthcare will bring in higher productivity and efficiency and more patient-centricity.
What would be your means of funding?
Munjal: The funds are already marked in our system. We don’t need money from outside. If we want, we can borrow. But we do not need it.
You have asked for representation of three on the board. Would there be any other structural changes also in the board?
Munjal: First structural change would be addition of three more members to the board. We don’t think there will be anymore. As you know, currently there is a resolution, promoted by some of the existing shareholders, to remove some of the board members and take in three new ones. The new members have already been taken on. Both of us do not believe that there is a need to remove the current ones because the company of this size needs a large board.
Suddenly everything in Fortis started going wrong. It is going to be a challenge...
Burman: The company went south because of some obvious reasons. And the management was busy putting out fires rather than taking care of the company.
Munjal: To bring back things into order is the biggest thing that we can think.
People would be able to take their attention away from all those diversions and focus on things that matter such as looking after patients, ensuring equipment are up in place, etc. We will help them support the system so that the management focusses on making sure funding is available, liquid is available and when new investment is required we will go and make them. That I think will be the biggest change.
What is your stand on SRL?
Munjal: Often we have said SRL should probably be divested, because there is a need for lot of attention and focus on each of the two businesses – hospitals as well as diagnostics. Even though, they are connected. We are for the divestment of SRL not because of monetary reasons.
Having said that, once we are on the board, we will be able to have a conversation with the SRL board and management and if it makes more sense to keep it, we will keep it. If none and there is no management bandwidth to focus on both, then so be it.
The aggressive bidding which came through, what was the reason behind it? It is also seen as northern business community not letting go and standing by as a family for Fortis promoters?
Munjal: Separately both of us (Burman and I) have had an interest in healthcare for a very long time, both through operations we have been involved with and the entities which we have promoted as well as the companies which we have been involved with.
The intent is to make healthcare better, more efficient, cheaper, and more available.
So we had taken a decision again that we will get involved in something only if it has social fallout, things that allow us to get into leadership position in a period of time, and things which we are passionate about.
Fortis met all these criteria -- Fortis is India’s largest healthcare system, established as outstanding network of hospitals both owned and managed, great buildings, good technology, good team of doctors and nurses.
But, at this moment, it is in need for attention both in terms of liquidity required, and more than liquidity there is a need to repair the reputational damage that has taken place.
So our belief is that with our kind of governance systems being brought in – both of us have been involved in some of the best governance systems in the country – we actually turned out to be the best ones as we address all these aspects for Fortis.
The set of baggage you are talking about is what created the problem for Fortis and that is why the company became available. If it was not so, this company was not available to anyone.
Burman: It is not right to say anyone is protecting anyone. Nobody is protecting anyone. We made a bid for an asset and we won that.
Ours was the best. We were not just two of us bidding, there were many others. It is not about north and south, Fortis is a national business and we run international business.
Corporate hospitals are always accused of steep costs of treatment. If you want to expand the base, this needs to be corrected. How do you plan to do that?
Munjal: You are absolutely right. That is what I was saying. Our experience in running efficient operation is going to help in many ways -- high quality procurement, high quality management system, and high quality HR system. All these will bring in efficiency. Higher efficiency means what -- being able to do the same thing with lesser resources, therefore, at a lower cost. Therefore, you can do two things; you can either do much more or you can do much better or combination of both.
We hope our coming in, there will be a little bit of cooling down. This would help get the focus back to where it should be as Fortis is a good system. There are a lot of good people inside. It is just that they are all stressed with all external issues, inquiries and lack of liquidity, etc, which are making it difficult for them to work. Once these issues are taken away from them, they will take the margins up, improve the care and improve the scale.
We have already made extensive plans, but we do not want to disclose them. We first want to get the shareholders’ approval, them share the plans with the board and hopefully the board will find them to be good idea that can be implemented.
How do we use technology for patient record management? How do we convert it into a high quality hub-and-spoke system? The overall system benefits from this. We will be able to bring costs down, focus more on technology, research and innovation and address more people and more geography.