Dubai: The bedside manner Dr Azad Moopen honed to perfection in his original vocation is very much in evidence when he sits down to discus his present calling. The tone is understated and not given to hyperbole, and the details of present and upcoming business plans are laid out with surgical precision.
As chairman and managing director of the DM Group, one of the UAE's leading integrated health care companies, Dr Moopen is now plotting the next logical move to expand in prime Gulf markets as well as in India. The funding to make all of it happen is in the process of being committed, and one reason why he has been logging quite a few air miles flitting across continents in recent weeks.
Just hours before his next flight, Gulf News caught up with Moopen last week to find out how he is scripting the group's game plan for the mid-term.
GULF NEWS: It's rumoured the group is considering bringing in new equity partners to fund an expansion. Is there any truth in this?
Dr Azad Moopen: Yes, it's true. We are looking at various options to finance the many plans we have on the drawing board.
We have had a private equity partner — India Value Fund, for some three years now. They have a minority stake in the company and their participation has been helpful to us right across our recent projects.
We now have a presence in India and the GCC, managed through two holding companies. India Value Fund's involvement is in both.
It's now our intention to develop these chains further. We are looking at various options — IVF may raise their stake or some other private equity firm may come into the picture.
Discussions are on. This will be to fund our expansion, especially in India. We want to enter all the regions through acquisitions of existing hospitals. To this end, we need an infusion of large capital.
Getting a new equity partner at the parent company level is needed to tap the required funds.
But why a private equity partner as opposed to having someone in the same industry as yours?
We are going to be the operator of all the hospitals and health care facilities in our chain. So, instead of going in with another strategic partner it's better to partner funds that can bring in the money and help us in other areas such as financial, IT and health care.
We think we are reasonably good in health care management. There's no merit accruing to us having another partner in the same space.
The domain knowledge we already have, what we need and value is the non-domain knowledge that a private equity firm brings. For them, any company they consider for investment is a wayside inn.
They will remain for five to seven years, liquidate the profits thereafter and make an exit.
Isn't there a risk that the selling out could happen to another health care provider?
I don't think there's any risk, we have sufficient checks in the MoUs with the private equity firm such as having the first right of refusal. We also have an understanding with the firm that the sale will not be to a strategic partner, but an investor like themselves.
Will you still have majority control following the next round of equity divestment?
The promoter's share will not drop below the majority. As it is, we needed to dilute our portion ahead of an IPO in three years.
The idea is to have a consolidated IPO, preferably — given the present market circumstances, in India. As of now, our Gulf operations in the Gulf account for 80 per cent of the revenue stream.
In three years, we believe the India operations will grow to 50 per cent because the acquisitions we are planning are going to be big. The whole reason for raising capital is to have a strong "India story" for an IPO in India.
There is an option to go for an IPO even on the GCC operations in a place such as Dubai or Saudi Arabia. But looking at the present market situation, India is better. But a lot could change in three years.
If you look at the requirements for an IPO in India, it's better to approach the market as a combined entity consolidating both our India and Gulf interests. A lot of Indian companies with income coming from abroad are getting listed.
Don't you feel three years is too short a timeframe to acquire a strong pan-India presence?
Agreed, health care is a business which requires years to build and stabilise. However, instead of going down that route, we thought it made better sense for us to take over profit-making units, even paying a premium. Better than wait five to seven years to build a chain of totally new hospitals.
Do the acquisitions have to come with a majority stake?
We are only going into places where a majority stake is available.
The two leaders in Indian health care, both public limited companies, have turnover in the range of Dh1.17 billion (Rs14.97 billion) to Dh1.56 billion.
The players after that are below Rs5 billion in turnover. In a year's time, we aim to have a turnover of more than Dh780 million from a combined India and GCC operations.
And with the India acquisitions, we want to reach between Dh780 million to Dh1.17 billion and be in the first three. If we are thus ranked, that itself makes you eligible for an IPO.
From a plus Dh780 million turnover, and the profit that comes from it, we become eligible for an IPO in India. At those turnover levels, people will look at you seriously and we can get a good price.
Will it be a different branding to what you have with Aster here?
I don't think we require a branding change. For those hospitals we acquire, we will use Aster.
It's the brand for the mid-segment and ideal for our India presence. Existing hospitals that we acquire will be co-branded.
The mid-segment is where there's a lot of inherent growth in India, and it helps that medical insurance is covering a wider section of the population.
In terms of preference, do you have any scale in mind when it comes to the acquired hospitals?
Ideally, these should have more than 5,000 beds, which we think with the acquisitions in the pipeline can be easily achieved. We already have a presence in Maharashtra, a presence in NCR.
We fund the local entrepreneur to further develop the hospital or raise the bed capacity. That's the model we work on.
Eventually, we should have a true pan-India presence and not be limited to a single region or two. In three years, we will have 50 per cent of the group turnover from India.
There's still some work to do on the GCC side, isn't there?
In Oman we have two hospitals, in Muscat and Sohar, and there are two in the UAE.
Going forward, Abu Dhabi will be a top priority for us. The best way would be to have a hospital and then create a chain of clinics. A city location is what we are looking at, not on the peripheral.
We are in discussions with a few people who are ready to build a hospital and rent it to us on a long-term basis. For them it's a real estate investment.
Abu Dhabi is completely covered under medical insurance, which will feed a requirement for more hospitals.
What of Saudi Arabia?
We have a joint venture with a large business group, Rashid Al Rashid. They are Riyadh-based with operations throughout the kingdom.
We registered a company with Saudi Arabian General Investment Authority to own and operate a hospital under the DM Group. Rashid Al Rashid Group will come in as a joint venture partner in this entity.
Whatever we do in Saudi Arabia will be with them. We plan to have five hospitals and 15 to 20 clinics and pharmacies.
All of your expansions revolve around the Aster brand. What of Medcare?
With Medcare, which is our premium brand, the plans are to have a chain of clinics. Primary care clinics are not pulling down your brand. What we have done is instead of everyone coming to the hospital for all ailments, even a cold, we are taking primary health care facilities closer to them.
We have clinics established in Dubai's high-income communities such as New Dubai and Mirdif.
Pharmacies constitute a major component of your operations. Are they significant contributors to the bottom line?
Pharmacies give us the full spectrum in health care. This is required if you are to service a client's needs in full.
It increases your turnover significantly, but profit-wise, it's not giving you a major advantage because the Ministry of Health strictly controls drug prices. Profits from pharmacies have come down significantly.
It's more for providing a comprehensive health care facility than in the expectation of large profits coming out of it. At the same time, it's easier to establish pharmacies than hospitals and clinics.
You can have it at much closer intervals. The challenges are much lower.
We started establishing clinics in 1987. We have 30 of them, but the pharmacies total nearly 60. So the turnover increases, but the profit percentage is smaller.
Beyond the core lines, is there anything further you are planning in health care?
We believe there are two or three areas where we can contribute our domain knowledge. Health care consultancy is one, and we already have a division. It advises companies in health care which want to start something here.
Another initiative is in the placement of health care professionals. We have a large database of them which can be offered to other health care providers in the GCC and outside.
The third area is in the IT space of health care. There's a proven software that our own pharmacies are using. It's not patented, we want to do so and offer it to others.
There's another software that could be used by health care providers and medical insurers in processing claims.
All of these should keep you busy for a while…?
It will, but I am not complaining.
Fresh capital soon
Dubai headquartered DM Group plans to bring in fresh capital to fund its India and Gulf expansions within the next six months. "We should finalise a new private equity partner during this period," said Dr Azad Moopen. "Some have even been shortlisted. Their interest stems from our recent performance and what we intend to do to take it to the next level."
