New Delhi, Tuesday, August 10, 2010: India's top hospital operators are looking to expand overseas to leverage their strengths in other markets as well as to attract medical tourists, officials and analysts say.

Industry leader Apollo Hospitals) is looking for contracts to manage hospitals abroad, while Fortis Healthcare is aggressively looking for acquisitions as an expansion strategy.

However, officials at both companies said they continue to focus on their local expansion plans as well, where the potential continues to remain high.

There is ample growth opportunity in India, which the hospital chains are aggressively tapping, but these companies still need to go overseas to enhance their brand value, which will drive up medical tourism, said Rashesh Shah, an analyst with Mumbai-based brokerage ICICI Securities.

"If Indian firms can buy some good hospital brands overseas, they can easily earn the trust of overseas patients," Shah added.

India's healthcare sector, estimated to touch $14.2 billion by 2012 from $9 billion in 2006, according to a study by consultancy firm KPMG last year, offers huge opportunity although not enough to quench the global ambition of Indian operators.

An overseas acquisition can give Indian hospital chains access to advanced knowledge base and technology and also help it offer cheaper drugs and services to the patients at target companies, said Sapna Jhawar, an analyst with Mumbai-based brokerage Sharekhan.

ASIA, AFRICA

Fortis said it was looking for opportunities in Asia, but analysts say there could be good opportunities in other regions as well.

"Indian companies can explore opportunities in countries in Asia and Africa, where people have money but don't have good health infrastructure," said Murali Nair, partner at consulting firm Ernst & Young, adding opportunites of offering cost-effective services also existed in UK.

Apollo has a stake in a Mauritius hospital — its only investment overseas — but manages a few hospitals on contract overseas.

"I will not invest money abroad unless it gives me return," said S K Venkataraman, chief finance officer at Apollo.

The operations and management business overseas is significant in terms of profitability, but not in terms of turnover, Venkataraman said, adding the company will continue to look for more such opportunities.

Meanwhile, Fortis is preparing for other opportunities beyond India to become Asia's healthcare leader after it lost out in the race to acquire Singapore-based hospital chain Parkway Holdings.

"There are a bunch of opportunities we have already identified which we will evaluate and engage with," said chairman Malvinder Singh on the possibility of future acquisition.

The group has between $800-900 million in cash and a well-established line of credit, which would be used for the acquisition of one or more assets, Singh said.

So far this year, there have been M&A deals worth $8.2 billion in the hospital industry in Asia-Pacific and worth $93 million in Africa and the Middle-East, according to Thomson Reuters data.

However, for both companies, the local focus remains just as strong. Fortis, which manages 5,500 beds, plans to add 2,500 more in the next 18 months in India, its chief executive said last week.

Apollo too plans to add 3,000 beds in four years to it current capacity of about 8,000 beds, a local media report said, quoting chairman Prathap C. Reddy.

Ref: Economic Times