Business Standard

Steady focus

Pai is charting an ambitious course for his group in his characteri­stic self-assured and understate­d manner, writes Anjuli Bhargava


It was at 18, when he failed to make the entrance cutoff for Manipal medical college and had to instead go to Davanagere in Karnataka to study medicine, that Ranjan Pai realised everything in life wasn’t going to be handed out on a platter. It was only when he did well in his first year of MBBS that his father, a stickler for performanc­e, allowed his only son to transfer to his medical college in Manipal.

This invaluable lesson, learnt 30 years ago, stayed with Pai as he transforme­d the medical college he inherited from his father into a mini empire with three verticals: medical education, hospitals and insurance. The Manipal Education and Medical Group (MEMG), the privately held holding company under whose umbrella the three wings operate, is now sizable with a yearly revenue of a little over ~6,000 crore.

Pai and I connect over Zoom for a coffee in early June, after India’s devastatin­g second wave is behind us. He’s at home in Bengaluru and I’m in Dehradun.

An ingrained value system with strong ethics — “no shortcuts”, always “doing the right thing” — stood him in good stead as he navigated his way through life. After MBBS at Manipal, Pai headed to study hospital administra­tion in Wisconsin, USA, worked briefly with Cigna health insurance and then headed to Malaysia in 2000 to set up Manipal’s first medical school there in a short period of 7-8 months. “With my hard hat and boots, I watched this facility come up brick by brick,” he says, adding that it was a great experience, living in another country and setting up a facility from scratch.

The value system bit has got my attention: Hadn’t Manipal acquired a dodgy reputation in its early days for being a “capitation” college? How then can he claim what he is? He clarifies that till 1993 when it was declared a university, the college had varied fee slabs for different categories but admissions were “always on merit”. Never did it lower the standards, auction seats or waver from its merit-based admission policy, he says, taking a sip of his coffee. Post-1993, all admissions were based on an entrance exam and subsequent­ly, on the NEET test. The fee, he says, has remained consistent — unlike in many rival institutio­ns — before and after the NEET.

By 2000, Pai, fresh off the boat from the US and brimming with ideas, had enough exposure to know that he needed to step up to take Manipal to its next stage of evolution. So, even as he operated out of Malaysia, he’d spend a week every month in India to set up a holding company — MEMG — to profession­alise the businesses and raise resources to run it the way he envisaged it. At the time, Manipal had a single loss making hospital in Bengaluru, besides the medical colleges. Pai wanted to turn around the hospital, and his father gave him a free hand to do so. He brought in a profession­al manager from GE Capital for this and also made his first eight or ten senior hires in Bengaluru.

The timing was on his side. When Pai returned bag and baggage from his Malaysian stint in

2005, India was booming and private equity was at a takeoff stage. He decided to ride the wave and the group raised 13 rounds of funding, totalling close to $1 billion, delivering returns of anywhere between 15 and 25 per cent to all investors who exited. As a result, MEMG had the capital it needed to grow and diversify. In 2017, it forged a joint venture with Cigna, the company he’d worked at in the US, to enter the health insurance segment.

Conservati­ve as many multi-generation­al groups tend to be, it took a prod from their investors, TPG, in 2015 to begin to “punch above their weight”. It was when Fortis Hospitals came up for sale in 2017-18 that MEMG revealed its true ambition. It fought aggressive­ly but lost the bid to Singapore’s IHH Healthcare “fair and square”. Post Fortis, the group went after one or two other deals, none of which fructified.

Not easily deterred, Pai again bid aggressive­ly when the Columbia Asia Hospital chain came up for sale in 2018-19. The deal was all but done when the pandemic hit last year. “We were days away from signing, pens down, all agreements in place, and the pandemic struck! I was beginning to think it was jinxed,” he says in a lighter vein.

After the initial crisis abated, the two parties went back to the negotiatin­g table and a deal was struck at ~2,200 crore this April. This catapulted Manipal into the second largest hospital chain

(after Apollo) with over 7,000 beds across the country. Pai, though, is far from done. Currently, 60 per cent of the group’s revenues come from healthcare, 15 per cent from the fast

growing insurance segment and the rest from education. A listing on the bourses of the healthcare segment in the near future cannot be ruled out.

I ask him why when every Indian parent aspires for their child to be a doctor, India finds itself on such a rickety boat: short in medical personnel, be it doctors, nurses or technician­s. Unlike engineerin­g, medical colleges in India have been hamstrung by a set of controls and regulation­s that have hampered their proliferat­ion, he says. The regulator (Medical Council of India) has been omnipotent and less than transparen­t.

All this has ensured that doctors remain in short supply. In contrast, nursing schools are in plenty but compensati­on levels need to improve to attract more people to it as a profession of choice.

I delve a bit deeper into the pandemic. What does he think will be its heaviest toll, I ask. And what could we have done differentl­y?

He thinks the mental toll of the pandemic may be severe on society as a whole, a silent but imminent threat. Further, the long-term effects on those who have suffered from the virus are yet to fully reveal themselves. On the economic front, some job losses may be inevitable in sectors like tourism and hospitalit­y but he urges Indian corporate entities to take a more “humane” approach. “Offices may be empty but don’t fire your security guards or housekeepi­ng staff,” he says. MEMG preserved all its staff at the bottom of the pyramid and pay cuts were restricted to those who earned above a certain threshold.

At a macro level, he sees the pandemic as a once-ina-lifetime event and doesn’t think outcomes would have been radically different even if we had done things differentl­y. “It’s easy to pass a judgement in hindsight, but New York was as bad as Bengaluru in the throes of the crisis,” he argues.

At a personal level, the pandemic has brought out many positives for him. The two-hour daily commute time he’s saved is dedicated to exercise, come rain or shine (one hour in the morning on the treadmill and swimming for an hour every evening). In the process, he’s shed 10 kg. He also gets to eat practicall­y every meal with his two young girls, who have been delighted to have their father around as much. While he misses his colleagues and the “creative juices” that flow in the office environmen­t, the trade-off for him hasn’t been bad. In his quiet, focused and unflappabl­e style, he’s coped better than most.

The timing was on his side. When Pai returned bag and baggage from his Malaysian stint in 2005, India was booming and private equity was at a takeoff stage

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