The Aggressive Player
With $800 million available to spend this year, NMC Healthcare has become one of the most aggressive players of the region
By: Jayata Sharma
NMC Healthcare has been making waves in the industry for it's aggressive expansion and investments since the last one year. Started from a one room clinic in Abu Dhabi, the group has become a global healthcare enterprise in 40 years. With a team of over 2,000 doctors and 18,000 paramedical and support personnel, NMC owns and manages over 135 healthcare facilities that includes hospitals, medical centres, long term care facilities, day surgery centres, fertility centres and home health services providers. Every year, over 8.5 million patients are treated by NMC doctors across UAE, Saudi Arabia, Kuwait, Oman, UK, Spain, Italy, Denmark, Slovakia, Egypt, Brazil and Colombia. In fact, NMC was the first company from Abu Dhabi to list on the London Stock Exchange and is now part of the FTSE 100 Index, an elite club of top 100 blue-chip companies by market cap.
The organisation has been bullish on the market recently, with major acquisitions and announcements doing the rounds on a regular basis.
Last year, it expanded into Saudi Arabia, the Arab world's largest economy, via two multi-speciality hospital acquisitions worth a combined US$40 million and two greenfield health facilities.
It entered the kingdom via the acquisition of a 70% stake in As Salama Hospital in Al Khobar and has plans to acquire a 60% stake in a new hospital in the southern city of Najran, and fully acquire a second hospital in the north western city of Ha'il. NMC also plans to build a multi-speciality facility in the eastern oil city of Al Khobar and has received regulatory approvals for its proposed new long-term care facility, Chronic Care Specialty Medical Center, in the Red Sea port city of Jeddah. Both acquisitions, as well as the greenfield project in [Al] Khobar, will be funded through a combination of cash on the balance sheet and utilisation of available debt facilities.
The company is looking at organic expansion together with possible acquisitions in the kingdom that could be funded via the NMC's cash pile – currently about $500m – or within the company's existing borrowing limits, or via other financing means including selling new shares to investors.
What's more? Emirates Healthcare, owned by Abu Dhabi investment group KBBO, also signed an operating and management contract with NMC Health for the management of Emirates Healthcare assets. Brands such as CosmeSurge, which provides cosmetic medical services in the UAE and the UK, as well as Emirates Hospitals and Clinics which provide medical services across six emirates in the UAE fall under this agreement. It also includes Emirates Rehab and Homecare Services, a division that provides home nursing, rehabilitation, therapeutic care and home-based care with a presence in the UAE, Slovakia and Oman.
NMC Health is now managing multiple private and public sector healthcare facilities across varied geographies, with total annual revenues from O&M verticals set to reach $19 million (Dh69.7 million).
Not only this, NMC Healthcare has been recognised as one of the Top Companies to Work For in UAE by Great Place to Work Institute. The remarkable achievement is further accentuated by the fact that NMC is the first healthcare services company in the UAE to be recognised as a Great Place to Work.
In addition, NMC Healthcare was selected by the Abu Dhabi National Oil Company (Adnoc) to manage operations of Ruwais Hospital to offer improved medical services to patients in Al Dhafra Region. Through this agreement, NMC Healthcare will manage all operations at Ruwais Hospital. Continuing to provide all existing services, NMC Healthcare will also introduce a range of new specialities at the hospital. Besides Ruwais Hospital, NMC has also been selected to provide Occupational Medicine Services to Adnoc employees across Abu Dhabi emirate. NMC plans to keep technology at the forefront as it brings about an integration of curative and preventive care.
This is just a glimpse to show how aggressive the player has become recently.
In addition, the group had announced that it has $800 million available to start investing in 2018 in the Gulf and other markets. The firm also plans to acquire hospitals and other facilities, as well as smaller investments in In-Vitro Fertilisation (IVF) facilities in Europe.
"We have an $800 million war chest available to us and see a lot of assets in the market that make sense for us," Prasanth Manghat, CEO and Executive Director of NMC Healthcare, was quoted as saying in a publication.
The company's main business has historically been within the UAE, where it has both built and acquired hospitals, including the acquisition in February of Al Zahra Hospital in Sharjah for $560 million. NMC sees opportunities in 2018 from increased government spending in Abu Dhabi, mandatory health insurance reforms in Dubai and Oman and the privatisation of the healthcare market in Saudi Arabia.
The $800 million includes $500 million from cash and funded facilities and $300 million from the company's balance sheet. It might also consider issuing a bond to help fund any acquisitions.
In a detailed interview with Prasanth Manghat, CEO and Executive Director, NMC Healthcare, let us get an insight into what's going on at NMC.
'The very nature of healthcare is where one pill can't cure one ill and hence can't have one bill. What I am talking here is the difficulty in application of similar standards in all the markets'
Tell us about last year. NMC was extremely aggressive.
I look back at the year with tremendous satisfaction. The year would go down in the books of history as one phenomenal year! Our M&A and Operation teams have worked overtime and gifted us with real gems into our portfolio. The legacy asset of Al Zahra at Sharjah, four new hospitals at Oman and two large facilities at Saudi Arabia have catapulted our company to the next level of performance. Also making into the elitist bracket of LSE, the FTSE -100 was a remarkable achievement. Back home in the UAE, the consolidation of businesses and centralisation of resources has given sufficient gloss to the top-line and bottom-line numbers respectively.
The flagship project of NMC, 43-year-old NMC Speciality Hospital in Abu Dhabi, accounts for more than 1.1 million of your (4.3 million) annual patient footfall. What makes this project hugely viable?
Serving community always pays. NMC Speciality Hospital, Abu Dhabi continues to serve a large section of the population and it's diverse and evolving needs. We have generations of loyal families coming to us for not only to get cured of their ailments and diseases but also for our hugely popular preventive and birthing program. It is about the trust that one earns over the period in time.
NMC has been high on acquisitions. What is the company's thought process behind it?
Mergers and acquisitions are vital. Consolidation of businesses is the need of the hour in order to rationalise the costs and grow quickly to newer geographies thereby making an access to the local markets. It also helps in enhancing product portfolios and increasing procurement/pricing leverage owing to the economies of scale.
The company is also the 1st non-Saudi organisation to launch a greenfield project in Saudi Arabia. What prompted you to make this move?
Saudi is at the cusp of huge opportunity. Not only the market is opening up with socio-economic reforms, but also there is this huge gap, with tremendous upside available, in the healthcare space. The growth in total population especially in the geriatric and paediatric segment coupled with lifestyle related diseases and disorders offer us an opportunity and responsibility to serve the region's geographies where ever the demand-supply gap appears. We are open to all options of co-operation with the government and we also continue to explore the private sector there.
How is the Saudi healthcare market different from the ones NMC has previously navigated in?
All markets offer unique challenges and opportunities. This is because the very nature of healthcare is where one pill can't cure one ill and hence can't have one bill. What I am talking here is the difficulty in application of similar standards in all the markets. Different markets are at different phases of evolution as in its dominance in primary, secondary, tertiary or quaternary, and product portfolio and government/regulatory environment and participation.
What marketing strategies does NMC apply to stay ahead in the game?
Ends do not justify the means. Working closely with the community, taking a longer view of the game, practicing ethical, collaborative and evidence-based medicine shall always keep us ahead of the competition.
NMC recently became the first company in the Middle East, which entered the UK's FTSE 100 index. How was this feat achieved?
Of course, not overnight as Rome wasn't built in a day. What goes behind the scenes is seldom noticed. I have a very strong management team and the structure is self-regulatory in terms of corporate governance. There is always a method to madness and a formula to success. This feat was achieved with just ensuring better outcomes in every walk of life that we live.
What is NMC's vision for the next 5 years?
Just five years, or a little more period, we got listed at the LSE at 2.10 pounds and today our stock price is over 13 times. Who could have predicted that? We are coming with a Vision 2023 document, which will take us to our 50th anniversary. As of now, we focus equally on growth towards the new markets and market segments, and consolidation of business in the current markets.
Dr. BR Shetty moved out of active management this year; how has been the journey of NMC post this change?
The journey of thousand miles, which began with a single step forward on April 2, 2012 when we got listed at the LSE, has brought us here today. We shall continue walking the vision of Dr. BR Shetty as we take pride in serving communities.