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Makeover at Manipal

From inducting professionals to private equity, the Manipal Group is preparing its education and healthcare businesses for the big leap.

Rahul Sachitanand | Print Edition: Dec 02, 2007

The throng of weekend shoppers at Himalaya Mall, on Ahmedabad’s Drive-In Road, may have chanced upon a new store in the city as they relaxed on a Saturday afternoon in Gujarat’s commercial capital. Spread across 5,000 sq. ft with imaginatively designed interiors, Manipal Cure and Care is the latest entry into the medical retail business from the Manipal Engineering and Medical Group (MEMG), an organisation best known for its chain of hospitals and educational institutions spread across the country and, more recently, across the globe.

From being a closely-held family business, MEMG has begun to rapidly transform its businesses into professionally-run outfits, as the owners Pais take a back seat and allow professional managers to run the show.

Cure and Care is not MEMG’s only foray. While the company plans to set up 50 or more such outlets (typically located in central business or shopping districts) and earn Rs 250-300 crore annually from this business, it has also invested significantly in other synergistic businesses.

 Game plan for growth

The Manipal Group is looking to evolve from a small closely-held business into one with a national and even global presence. Here’s how:
Expand its geographical presence by setting up colleges all over, even in places like Antigua, which could attract students from the Indian diaspora in the US, as well as Malaysia
Expand its hospital presence in north and west India through acquisitions, lease-rental and even greenfield projects
Enter medical retail and assessments with inorganic and organic initiatives; plans to build a 50-store-Rs 250-crore retail business. Even new businesses such as stem cell research, with Stemputics, are showing strong growth
Overhaul management by getting professionals to run each business and let family only act as advisors and facilitators for specific initiatives
Use private equity and even VC funding to jumpstart the growth of its businesses and eventually look to take them public
Its Stemputics, a stem cell research outfit, is expected to roll out in to treat a variety of ailments. Manipal Accunova, its clinical research outfit, has been merged with Ecron, a German firm, to give it greater scale and leverage in the key markets of Europe and the US.

Education empire

On the education side, MEMG has over 1.2 lakh students studying at its institutes (Manipal University being a not-for-profit venture). Here, too, it has acquired and invested in companies to expand its corporate profile. Recently, it bought a 70 per cent stake in a Bangalore-based competency assessment solutions vendor to expand its reach by integrating its operations with Pariksha, its own company operating in a similar market. “We are interested in opportunistic deals that give us an entry into a new or complementary market,” says Ramdas Pai, the 72-year-old Group Chairman of MEMG and the man driving the group’s foray into new businesses.

According to Pai, the transformation from an exclusively south Indian company into first a national and then a global operator began with the company’s foray into Malaysia to set up a medical college (and soon a hospital, possibly), which acted as a launch pad for a much broader corporate expansion.

“This project gave us the confidence in executing large-scale initiatives,” says Ranjan Pai, the 34-year-old heir apparent and CEO of MEMG, who relocated to Malaysia after graduating from medical school in 2002.

MEMG’s education business now has 20,000 students enrolled in formal institutions in India, about 5,000 in full-time programmes overseas and over 100,000 students in flexible education offerings. To fund its expansion in education, the company has raised $70 million in private equity from IDFC.

“We will expand our campuses globally and also invest in companies in the education business,” says Anand Sudarshan, a twodecade IT industry veteran, who joined the group as part of its management overhaul. While MEMG has invested $2.5 million in TutorVista, a provider of remote tutorial services, it is also considering new campuses in West and East Asia.

As the company grows from being a regional operator into a truly national and even global player, Pai realises that he will have to build scale across his businesses and is prepared to loosen his purse strings to stay competitive. In early November, Manipal Accunova acquired Germany’s Ecrona for an undisclosed sum. The combined entity has 265 employees and specialisation across Phases 1-4 of clinical trials.

“Drug development is an expensive business and can take upto 10 years for the entire process to complete. We believe that companies will look to India to make this process faster, not just more efficient,” says D.A. Prasanna, Managing Director and Vice Chairman of Manipal Accunova.

Meanwhile, the company has laid out plans to expand its network of hospitals from 1,600 beds to 3,200 beds in the next two years. According to Ranjan Pai, the company is inclined to look beyond acquisitions and green-field projects and even consider leaserentals to keep costs down.

“We want to become a national brand on the hospitals front. So, we want to go from Manipal and Bangalore to other southern cities and finally to Delhi and Mumbai,” he says. R. Basil, MD and CEO of Manipal Health Systems, says the company recently moved into Vijayawada with a long-term lease for a 350-bed hospital and is now eyeing properties across the country in Kochi, Hyderabad, Mumbai and Delhi. He, too, has raised $30 million from IDFC to support this growth.

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