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Abu Dhabi, UAESaturday 21 July 2018

Exclusive: NMC Health eyes profit increase in 2018, fuelled by $2bn warchest

Firm targets “exponential growth” and new acquisitions, says chairman BR Shetty

BR Shetty, founder and chairman of NMC Health. The company has $2bn at its disposal to acquire companies as and when it requires. Victor Besa/The National
BR Shetty, founder and chairman of NMC Health. The company has $2bn at its disposal to acquire companies as and when it requires. Victor Besa/The National

UAE-based NMC Health, which joined the UK’s FTSE 100 list of the companies with the highest market capitalisation last September, has $2 billion of funding available for investments and acquisitions in the coming years, and expects another profitable year in 2018 as it expands its operations globally, its chairman said.

“I have $2bn at my disposal to acquire companies as and when we can get them,” BR Shetty, who is also the founder of NMC Health, told The National. “For the want of money we will not eject anybody. We are waiting for a good chance.”

NMC is in negotiations with several parties and expects deals to be announced before the end of the year. Africa is a “good opportunity”, Mr Shetty said, as are Turkey, Europe, America, and the UK – which NMC hopes to enter by 2019. The company prefers to acquire “running hospitals that require funding and our assistance, for example through a management contract”, rather than greenfield projects - building a new hospital from scratch - which takes a long time, he added.

The company will also manage the new hospital under construction at Reem Island in Abu Dhabi and a Fujairah hospital, both owned by Dr Shetty’s private investment vehicle BRS Ventures.

NMC Health reported a 38 per cent annual rise in net profit to $209.2m in 2017, and 2018 will be another strong year as it continues to grow its portfolio, Mr Shetty said. He declined to provide detailed forecasts as the company is listed on the London Stock Exchange. It has a market capitalisation of almost $9.5bn.

“I can say exponential growth will be there. There is no way growth will come down because we are building, brick by brick,” the chairman said, referring to the healthcare provider’s $600m-plus acquisition spree in 2017. It has continued to purchase new assets this year, including controlling stakes in two GCC-based healthcare operators, the UAE’s CosmeSurge and Riyadh-based Al Salam Medical Group, for a total $207m.

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This month, NMC signed a non-binding agreement with Hassana Investment Company, a unit of the General Organisation for Social Insurance (Gosi), Saudi Arabia’s biggest pension fund, to form a joint venture providing healthcare facilities including up to 1,489 hospital beds in Riyadh and secondary Saudi cities. NMC would own a majority stake in the new company under the proposed asset swap deal, which has yet to complete, it said in a statement on June 11.

Demand for healthcare provision in the Middle East and North Africa is rising due to a rapidly expanding population. The region is forecast to need 470,000 additional hospital beds in the next four years to keep up with minimum per capita requirements set by the OECD, a JLL report said last year – equating to 3,130 new hospitals over the period.

In Saudi Arabia, efforts to boost public-private partnerships are set to create significant opportunities for investment in health care. The kingdom’s 2020 National Transformation Plan has set out targets for the healthcare sector, including increasing private healthcare spend from 25 per cent to 35 per cent of total healthcare expenditure.

Mr Shetty said Saudi Arabia is the most promising market for new investments and he expects it to account for an increasing share of NMC’s total business over the coming years.

The firm's $2bn "warchest" includes $800m already announced by NMC Health chief executive Prasanth Manghat this year, comprising $500m from cash and funded facilities and $300m from the company’s balance sheet, and there are additional reserves from Mr Shetty’s investment coffers, he said.

NMC launched a $450m bond offering in April, and in March said it raised a $2bn loan to be used for general corporate purposes and partly to refinance existing debt, but there are no plans for further fundraising at present, the chairman said.

Following investments in 2015 in two fertility treatment providers, Fakih IVF and Spain’s Clinica Eugin, NMC wants to expand its business in fertility, as well as in long-term rehabilitation and secondary care.

Medical technology is a newer focus for the firm, which has begun actively seeking investments in this space, Mr Shetty said.