NMC Health’s money man charts course for global expansion
Prasanth Manghat has a dream: “Across the Middle East I see a fragmented healthcare market, with no regional leaders. In five or 10 years from now that’s what I want our company to be – a global franchise from a GCC base.”
Following a big bank fund-raising this year, he has about US$825 million to help him realise that vision.
The company is NMC Health, the hospitals group that has come to play an integral role in the everyday life of UAE citizens and residents over the past four decades. Sometimes described as the closest the country has to a “national” health service, NMC is also one of its big business success stories, with a trailblazing listing of shares on the London Stock Exchange in 2012 reaping big rewards for shareholders.
NMC’s achievement has been largely the work of BR Shetty, its founder and chief executive, who famously came from India with $8 in his pocket and built a company worth billions of dollars.
Mr Prasanth has been deputy chief executive since January, and NMC’s future strategy will be driven by this softly spoken Indian who, unlike the founder, is a money man by background, rather than a medical man.
“The financial side of the business is very important. The 2012 London listing was such a big thing for us. We have got good financial resources, but the next expansion has to be done profitably,” he says.
Mr Prasanth has been helping to make NMC profitable for the past 11 years, since he joined the company from a career in finance in India. As chief financial officer in 2012, he was a key part of the team that pulled off the London IPO, the first by a non-oil sector UAE company.
The shares have quadrupled in value since 2012, and NMC has a market capitalisation of nearly £1.5bn (Dh8.4bn). Revenues grew 16.9 per cent last year to more than $643m and Ebitda rose 15.9 per cent last year to $102.5m.
That financial success has been largely built on the growth of the UAE medical business. NMC now has seven hospitals, two day-care patient centres, nine medical centres and 15 pharmacies. Last year, almost 2.4 million patients were treated in NMC centres in the UAE.
Mr Prasanth describes the strategy that got NMC Health where it is today: “In 2010 and 2011 we wanted to maintain the first-mover advantage we had with the NMC brand. It had been given a big boost by the introduction of medical insurance in Abu Dhabi, where we were very successful in this period.”
He adds: “After the financial crisis we identified areas where there had not been much investment, like the primary and secondary areas of health care, and also the new suburbs of Abu Dhabi, Dubai and Al Ain. Now we’re going beyond those areas to creating centres of excellence and specialism.”
There is a self-fulfilling logic to this growth, he points out. “It creates a bigger ecosystem to attract talent in the shape of qualified and skilled doctors. The region lacked capability and capacity and we have provided both. So we have been able to attract good doctors. Nearly all the doctors we hire are coming to the UAE for the first time, from India, other Arab countries and from Germany.”
They are attracted by facilities such as the 250-bed flagship hospital at the capital’s Khalifa City, expected to open this year, and the general hospital that opened in Dubai Investment Park last year. That has been the core of the organic expansion funded largely by the proceeds of the London IPO, but since the turn of the year the rate of growth by acquisition has accelerated.
In April, NMC announced two purchases in the UAE: the Dr Sunny Healthcare Group in Sharjah, and the in-home health services provider AmeriCare, for a combined $100m, adding to the UAE capacity. They followed what looks to be a clear signal of a shift in acquisition strategy with the first big deal outside the UAE. In February NMC invested €143m (Dh586m) in Clinica Eugin, a fertility treatment business based in Barcelona, bought from private equity investors.
“It was a very good opportunity. They do 8,000 cycles and have 26 clinicians. It’s the third-biggest fertility unit in Europe, and Spain is considered one of the biggest markets. it was also good value,” says Mr Manghat.
The Barcelona acquisition could be a template for future deals. “Outside the UAE we are looking at areas where there is a lot of medical knowledge attached to them, where we get benefits from combining a western platform with NMC, whether it’s via acquisition, joint venture or collaboration. Europe is likely to be a market where we can gain from a knowledge perspective, especially in something like oncology,” he says.
He is also looking at opportunities in Saudi Arabia and Qatar, where he feels that NMC’s expertise gives it an edge.
The acquisition programme will be funded from a $825m financing package agreed with bankers in February. About $350m will be used to repay existing debt on better terms (“The cost of capital is so low these days,” Mr Manghat explains) but the balance, about $475m, has been earmarked for acquisition finance.
That is a significant war chest, but he is determined to apply robust financial discipline. “There are a lot of private equity assets on the market, but you have to choose your targets carefully. We don’t want to be earnings dilutive. Others have paid pretty big multiples recently, but we’d like to keep them below 10 times earnings.”
The company that has emerged since the London IPO has a modern board structure, with seven independent directors on a 12-strong board, of whom four are women. It will be the job of that board to implement succession plans in the event that Dr Shetty decides to step aside from the top job.
But NMC’s future strategy, and Mr Manghat’s dream, seem to be firmly on course.
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