Business Times - 14 Aug 2010

The cerebral tycoon

Fortis chairman Malvinder Mohan Singh has an investment banker's penchant for
dealmaking. But he is also instinctively a step-by -step institution builder, a
believer in creating systems, processes and frameworks, and raising efficiencies.
By Vikram Khanna

'IT was purely a business decision,' says Fortis chairman Malvinder Mohan Singh, of the Indian
healthcare company's decision to exit from the takeover battle for Singapore's Parkway
Holdings on July 25. After a brief bidding war and weeks of speculation about who would gain
control of Parkway, Malvinder and his team decided to sell out their stake of just over 25 per
cent at S$3.95 per share to rival Khazanah, the Malaysian sovereign wealth fund. The Indian
company had paid $960 million, or $3.56 per share just four months earlier, and walked away
with a profit of $116.7 million.

For Fortis, Parkway was a strategic fit, which would have combined the operations and
capabilities of a healthcare leader in India with a big player in Singapore and Malaysia, and
provided an ideal platform for a pan-Asian healthcare business. 'But you need to marry
strategic fit and economic value,' says Malvinder. 'There's no point me telling my shareholders
that we've created this huge healthcare business, but economically, the returns don't work.
So, it was a clear cut, rational, objective call. It's not about ego or emotions. It's not about
winning at any cost. It's about doing the right thing from a business viewpoint and creating
value for shareholders.'

Malvinder, 37, one of India's youngest billionaires, has made many such calls during his
eventful 18-year business career, which has spanned both the healthcare and the financial
services industries. Probably the biggest of them was to sell his family's flagship company, the
Indian pharmaceutical giant Ranbaxy, to Japanese drugmaker Dai-ichi Sankyo in June 2008 for
US$4.6 billion.

In the lead-up to the deal, Ranbaxy had been working in partnership with global pharmaceutical
companies on R&D - an initiative Malvinder had spearheaded. 'As I began partnering with them,
I built some strong relationships. Then I realised these companies had a lot of challenges,' he
recalls. 'Their top lines were shrinking, patents were expiring, cost structures were high, R&D
productivity was low, emerging market presence was a gap in their business. I thought, all of
that is what I have at Ranbaxy: I have generics, I have emerging market presence, I have cost
efficient, high quality R&D and manufacturing facilities in India. In other words, I had exactly
what they lacked. So I thought, let's put it together. So companies approached me, we began
talking, one thing led to another, and we ended up created a new model in pharma with the
Daiichi Sankyo deal.'

'Many people had talked to us. All of them wanted basically the same thing - a hybrid model
which focused on both developed and emerging markets together, and innovation and generics
together, a 2 x 2 matrix. I was convinced it was going to happen, it was just a matter of time.
We were the first to make it happen. And now, everybody's doing it - Glaxo, Merck, Sanofi,
Pfizer, Abbott - they're all doing it.'

But for Malvinder, the price of creating a new pharma paradigm was to exit from Ranbaxy, a
company his grandfather had built up from 1952. 'It was the first time that had happened in
India - a large business family selling its flagship business,' he points out. 'It created a bit of a
flap. People were saying, a crown jewel gone, India's first MNC sold, why did I do it, et cetera. I
said, look, it was a business call. It was the right thing to do. Today, everybody's doing it.'

The deal also happened to be impeccably timed. It was done in June 2008, just months before
the global financial crisis hit.

Educated at Delhi's St Stephen's College, and Duke University's Fuqua School of Business,
Malvinder's approach to business is cerebral rather than emotional. Having worked briefly in
Merrill Lynch after college, he has an investment banker's penchant for dealmaking, where he
can be bold and audacious. But he is acutely mindful of value. He is also instinctively a step-by-
step institution builder, a believer in creating systems, processes and frameworks, and raising
efficiencies.

He learned a lot, he says, from his father, the late Parvinder Singh, who built Ranbaxy into a
global player from the 1970s through the 1990s. Dr Singh, a US-educated PhD, was widely
regarded as one of India's most visionary captains of industry, who believed in professionalism
and globalisation long before most other industrialists. When Malvinder joined the business in
1993, his father made him start at the bottom and work his way up, like everybody else.
Malvinder and his younger brother Shivinder became the main shareholders of Ranbaxy after
their father's death in 1999, by which time Malvinder was a senior manager.

'One of the things I learned from Dad was the framework of the basic tenets of business,' he
says. 'First, no matter what business you get into, you must be in the forefront of that
business. You must look at that business from a global perspective. You must create
institutions of excellence. You must operate with a clear set of values. And you must create
value for your stakeholders. This is the framework we use, to run businesses or to look at
entry and exit.'

Malvinder's talents for dealmaking and institution-building came to the fore in the
transformation of Fortis into an Indian healthcare industry leader in less than 10 years. The
group started with one hospital in Mohali in the state of Punjab in 2001. 'Initially, our focus
was to get the learning and the experience and we concentrated on organic growth,' he says.

Four years later, Fortis acquired New Delhi's prestigious Escorts Heart Institute, which was
double Fortis' size. After taking management control of Escorts in 2007, Fortis set about
finding ways to create efficiencies. It reduced the number of beds from 330 to 280, cut prices
by 10 per cent, trimmed headcount from 2,000 to about 1,500, shortened waiting-times for
operations, cut the average length of stay from seven days to 5.2 days - which reduced costs
for patients. The net result: Within two years, margins went up from 10 per cent to 24 per
cent and revenues went up 30 per cent.

In August last year, Fortis acquired 10 hospitals from the Wockhardt group, which propelled it
to the forefront of India's healthcare industry. Apart from size, the acquisitions have added to
Fortis in other ways. 'Fortis is not even a 10-year story,' says Malvinder. 'But with Escorts,
which is a 25-year story and Wockhardt which is 20 years plus, the capability, knowledge and
experience, the management processes, all that came into our system.'

He points out that Fortis now has a total of 170 systems and processes for running hospitals.
'They are institutionalised, and systemised,' he says. 'Just one example: with a 92 per cent
level of accuracy plus-minus 5 per cent, we will tell you when you enter our hospitals what
your treatment will cost. And if it's minus 5 per cent, we look into it and ask ourselves, why
wasn't it accurate? What didn't we understand about this case?'

Malvinder took a similarly systematic approach to building Religare, India's largest private
financial services company, together with its CEO, Sunil Godhwani, a family friend and one-time
client of a small stockbroking business that Malvinder's family controlled.

'I've always been interested in financial services,' he says. 'It's where I started my career and I
understand the industry well.'
understand the industry well.'

He also views financial services as 'a call on India's growth'. He explains: 'Financial services is a
business that's going to be a backbone. If your economy is growing, your financial services will
expand, there will be more transactions. Also, there are not many business families in financial
services, nor any integrated, global financial services company out of India. And India is
globalising. As it does that, Indian business will globalise too.'

Malvinder was clear from the start that he wanted Religare to be an international business, not
just a domestic business. But he also believed that a prerequisite for going global was to build
a strong domestic base.

'So at Religare, we started by creating a retail franchise across India. We did it quietly, without
people realising. Now we have more than 2,000 outlets in about 600 cities. That retail base is
stronger than most banks, in terms of reach. We will use that reach to pipe through other
products and services.'

Religare also built other platforms, including life insurance, asset management and investment
banking. This was partly done through acquisitions, which included the purchase of Temasek
subsidiary Lotus Asset Management in 2008; the UK's oldest independent broking and
advisory firm Hichens and Harrison the same year; and Northgate, a US-based fund-of-funds
business, in 2010.

'One by one, we're building the blocks across different businesses in financial services,' says
Malvinder. 'Today, we've got 10 verticals. They are a mix of asset-heavy businesses, such as
consumer finance, housing finance, life insurance and health insurance; and fee-based
businesses, which are asset-light, such as investment banking, asset management, private
equity and broking. In the asset-heavy businesses, we want to focus on India, where there is
huge potential. But in the fee-based businesses, we want to go global.'

Although Religare's global headquarters are in India, its investment banking headquarters are in
London and it has offices in Hongkong and Singapore.

Singapore is where Malvinder has chosen to be based. Why Singapore?

'We want to be part of the healthcare business here,' he says. 'Singapore is known for its
service excellence. One of the reasons why Parkway is successful is because of the capabilities
and skill sets available in Singapore: high service quality, strong medical education, capable
doctors, a strong public healthcare system, which is a feeder for doctors coming into the
private system. Singapore is also a regional hub, a great place from which to conduct business
in Asia. And we want to have a pan-Asia, integrated healthcare business.'

Parkway was supposed to serve as a vehicle for Malvinder's pan-Asian vision. 'The vision
remains the same, but the vehicle will change,' he says. 'Our team is already up and running to
explore possibilities.'

He emphasises that just because Fortis bowed out in the battle for Parkway doesn't mean it is
back to square one in pursuing its regional ambitions - because it has learned a lot from the
Parkway experience.

'It's the difference between somebody reading a book about a country and somebody actually
travelling to the country with a rucksack and going into the towns and villages and meeting
the people,' he explains. 'That is the difference between us not having been in Parkway versus
having been there. Through the eyes of Parkway we have been able to understand more about
Asia: the geopolitical issues, various countries' policies in healthcare, the regulators, and how
they operate. This is not something you can easily learn from the outside. You have to
experience it. Now we understand what the competition is in various markets.

'And we have built relationships in Singapore. All of that is soft, tacit knowledge. We have
further got more clarity and understanding of what can and what cannot work in healthcare in
Asia, and how to do it. So it's not back to square one.'

Looking forward, Fortis has many options for expansion, both in Singapore and Asia. 'It could
be through an acquisition, through a partnership, or through doing something afresh,' says
Malvinder. 'Also, healthcare is not only hospitals. It also makes sense to look at a Reit in
healthcare. We have the largest pathology and diagnostics business in Asia outside of Japan -
a private company in India, which we could bring in here. Asia also has a strong GP business,
which is another opportunity to evaluate.

'We won't overstretch, and we won't look at everything at the same time,' he adds. 'But if you
look seven to 10 years from today, you will see Fortis in different segments of healthcare
across Asia.

But whatever Fortis does, or buys, Malvinder's ground rules are clear.

'It's not just about you, or your dream,' he says. 'Stakeholders count too, and you have to see
things from their perspective as well. You can't be selfish and say: this is my vision, my
passion, my dream, and at any cost I'm going to do it. Then you should do it on your own, not
with other people's money and other people's careers. When you run an institution, you have
to be disciplined.'

vikram@sph.com.sg

Malvinder Mohan Singh

Chairman, Fortis Healthcare Ltd

1972 Born in New Delhi, India

1993 Degree in Economics from St Stephen's College, Delhi

1998 MBA from Fuqua School of Business, Duke University, USA

2006 CEO and managing director of Ranbaxy Laboratories Ltd

2008 Completes sale of Ranbaxy to Daiichi Sankyo for US$4.6 billion

2001-present Chairman, Fortis Healthcare Ltd

2007-2010 Chairman, Religare Enterprises Ltd

March-Aug 2010 Chairman, Parkway Holdings Ltd

Awards

2005 Rajiv Gandhi Award for Leadership

2006 Most Promising Young Corporate Leader and Best Young Corporate Leader

2008 Financial Chronicle Businessman of the Year

2008 Golden Peacock Business Leadership

2009 Dynamic Entrepreneur

2010 Indian Business Leader of the Year

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