| 17 Jun 2009 |
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India's Apollo Hospital eyes Middle East investments
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Apollo Hospitals of India is seeking support from Middle East investors for its expansion plans.
The appeal was made by Executive Director (Finance) Suneeta Reddy during a presentation on financing new healthcare projects given to private equity investors and financiers in Dubai.
"The Indian healthcare sector is recession proof but the group has been going slow on overseas expansion projects as the focus has shifted to developing new hospitals in India," she said.
"We have very few projects in the Gulf and the Middle East. To run a hospital successfully, it is necessary to understand the cultural and legal environment of the region. We have not really made any investments in this region."
The company is currently facing investigation by India's Directorate of Enforcement over the way $70 million (Dh257m) it raised through a global depository receipts (GDR) issue was spent.
Asia's largest hospital group previously announced plans to expand into the UAE, Oman and Saudi Arabia, but later changed its focus to the management - rather than ownership - of hospitals.
The group had set up a joint-venture partnership with the Belhoul GroupBelhoul Group
to open the Belhoul Apollo Hospital in Dubai in 2003. But Apollo later withdrew and the hospital's name was changed to Belhoul Specialty Hospital.Reddy told an investor conference that Apollo had withdrawn from Apollo Hospitals Colombo, a 350-bed project in Sri Lanka, due to political instability, high currency risk and the lack of qualified medical professionals. And a project in Mauritius had proved expensive as everything had to be imported into the island state.
Apollo is now trying to introduce a new business model for the development of hospitals. "We have approached the Indian finance ministry for permission to allow real estate investment trusts to separately own the hospital land and buildings to reduce project costs by 50 per cent so that we can focus on its core competencies."
About 50 per cent of the total expenditure for a hospital project comprises land and building costs. The group is also considering leasing medical equipment to reduce its operational costs.
Many technology companies offer medical equipment on lease and, given the high rate of obsolescence, leasing options give hospitals scope to upgrade their equipment and introduce newer technologies.
The group, which started in 1983 with just one hospital of 150 beds, now has 43 hospitals with a total of 8,000 beds and employs 4,000 doctors. Apollo aims to have 65 hospitals with 14,000 beds and 6,000 doctors by 2014. It is currently developing more than 20 Apollo Reach Hospitals in tier two and tier three Indian cities.
Apollo has informed the Bombay Stock Exchange and the National Stock Exchange that it received a show cause notice on May 20 from the Directorate of Enforcement.
The directorate alleges that the company violated foreign exchange rules by using the funds to buy shares in Indian companies.
But Apollo told the stock exchanges: "As far as the company's understanding goes, the company is not in contravention of any provision of law and the company feels that the issue may have been a subject matter of interpretation, which the company will be addressing in due course."
By VM Satish
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