Chief executive and MD, Manipal Education and Medical Group (MEMG)
Rank in the Rich List: 57
Net Worth: $1.75 billion
Big Challenge Faced in the Last Year: Policy paralysis and liquidity tightening in the market
The Way Forward: To grow aggressively in health care with a possible IPO in the next 3-4 years. Entering the health insurance business
It is rare for a well-managed fund to re-enter a company it has already exited profitably with its single largest investment ever. For Premji Invest, Manipal Global Education Services (MaGe) has proved to be just that tempting. Word on the street is that within a year of exiting, the family office of Wipro chairman Azim Premji is pumping in a fresh round of $150 million into MaGe, the education business of Manipal Education and Medical Group (MEMG). And those familiar with this development know exactly how big a role Ranjan Pai, the 41-year-old chief executive and managing director of MEMG, has played in this validation.
Ranjan started MEMG in 2000 in a small rented house near MG Road, Bangalore’s central business district, with an initial capital of $200,000. Over a span of 14 years, he has grown his company into a billion-dollar business. He has diversified from the family’s not-for-profit education trust, Manipal Academy of Higher Education, and built MEMG, which runs education and health care services. Since its inception, the entrepreneur’s company has grown at a compound annual growth rate of 20 percent, and currently has revenues of more than Rs 5,000 crore. Nearly 60 percent of its business comes from education.
Ranjan’s success in health care and education—both highly regulated areas—has been hard won. In some part, he owes his accomplishments to what he calls his “wake-up call”, when as a teenager he failed to get admission into his family’s institute, the prestigious Kasturba Medical College (KMC) in Manipal. He had no choice but to enrol in a lower-ranked institute before transferring to KMC in his second year. “This incident made me realise that I had to make it on my own,” says the non-practicing doctor.
The Pai family has been operating in the field of education for three generations and, under the aegis of Ranjan’s grandfather Dr Tonse Madhava Ananth Pai, it set up India’s first private, self-financed medical college in 1953. Ranjan graduated with a medical degree from this institute.
His grandfather put Manipal on India’s education map, and Ranjan has taken the family name a step further by establishing a separate corporate entity through MEMG. “My initial plan was to settle down in Manipal and continue with what my grandfather and father (Padma Bhushan awardee Ramdas Madhav Pai, also the chancellor of Manipal University) have built,” Ranjan says.
That changed after he went on a fellowship to study hospital administration at the University of Wisconsin-Madison, USA.
“When I moved to the US in 1996, a whole world of opportunities opened up. I wanted to create something on my own, something that went beyond the existing family set-up, and pushed the Manipal brand further,” says Ranjan.
Building on a family name
A kernel of an idea born in the US came to fruition in India through the Manipal Education and Medical Group. Today, it operates three major business lines: MaGe for education, Manipal Health Enterprises Pvt Ltd (MHEPL) for its hospitals and health care services, and Manipal Integrated Services (MIS), which offers facility management to educational institutions, hospitals and corporate houses. In 2006, he launched Stempeutics Research, a stem cell research company with a focus on regenerative medicine.
Incidentally, it was only after he laid the foundation of his business that he joined the board of the family trust, which operates institutes such as Manipal University in Mangalore and in Jaipur, Manipal Institute of Technology (Microsoft CEO Satya Nadella and Nokia CEO Rajeev Suri are graduates) in Karnataka.
Today, his education business (MaGe) accounts for a bulk of MEMG’s profits, and has established itself in the industry: It owns and operates universities in Malaysia, Antigua, Dubai and Nepal. In India, it offers higher educational, testing and assessment services and corporate and vocation training programmes.
That said, his health care business is also proving to be a sweet spot with investors. In a deal that is yet to be announced, MHEPL is raising $150 million from private equity firm TPG Capital. “We are waiting for the closing of the deal before announcing it,” says Ranjan. “Health will be a big area of growth for the next five years. A possible IPO in three-four years is on the anvil for the health care business.”
Ranjan wants to entrench the Manipal brand in health care, not just in India but also in other countries. He has already initiated his plans for expansion. At present, MHEPL owns or operates over 5,000 beds in 11 hospitals; Ranjan plans to add another 3,000 beds over the next five years. To expand geographically, he acquired the Jaipur-based SK Soni Hospital for about Rs 120 crore earlier this year. The 280-bed private multi-specialty centre was renamed Soni Manipal Hospital. It is the group’s first health care foray in north India, and there are talks of expansion in other parts of the country. “Along with regular health care services, we will have specialised centres for maternity care, ambulatory surgery and also provide full-service same-day surgery facilities,” says Ranjan.
Last year, MHEPL established an international presence with the acquisition of Arunamari Specialist Medical Centre in Malaysia for about Rs 100 crore. The deal included a 200-bed tertiary care hospital at a nearby location.
Ranjan is not the only businessman in India to be bullish about health care but, with the Manipal name, he has the perfect platform to launch new initiatives. He is also looking at the lucrative health insurance arena, and is already working through the challenges of building a network, setting up efficient claims processing and partnering with financial institutions. “We have built a team that is looking into every aspect of the health insurance business. I need to be a hundred percent convinced before I start. This is something that is very close to my heart and we are working towards it. If not immediately, then in the next two to three years,” he says.
Ranjan recently started funding health care and biotech startups, a strategy that helps him stay abreast of developments and advancements in this field.An investor with a biotech bent
Over the last three years, the billionaire entrepreneur has gained the reputation of being a patient investor who has amassed an extensive portfolio. His willingness to channel funds into startups that focus on high-risk sectors such as life sciences and biotechnology—these are businesses where investor interest is usually low—has won him the admiration of peers and entrepreneurs.
In his investor avatar, Ranjan has teamed up with an old friend, TV Mohandas Pai, former Infosys board member and chief advisor to the Manipal Education and Medical Group. Together, the two Pais, who have known each other for at least 14 years, have launched multiple investment funds. “Though we are different people, we get along easily. I’m very direct and not as patient as Ranjan. He is a great networker and can impress anybody in the first meeting. He is a doer and has a sharp mind for finance,” says Mohandas.
In 2011, they launched their first fund, Aarin Capital Fund, with a corpus of $50 million to invest in sectors such as health care, life sciences and technology. To date, it has put money in 11 companies in India and abroad. The fund has also provided seed capital with investments ranging between $250,000 and $9 million. Here, too, Ranjan sticks to the fields he knows best: Aarin’s portfolio includes Silicon Valley-based Counsyl (clinical genomics player) and Prazas Learning (personalised math tutoring) in New Jersey. The Indian portfolio has education company Think & Learn, Invictus Oncology (cancer-drug discovery firm) and Vyome Biosciences (biopharmaceutical startup).
Shiladitya Sengupta, co-founder and director, Vyome Biosciences, says Ranjan’s investment philosophy is driven by innovation and risk-appetite. “There is hardly anybody in the country keen on investing large amounts in life sciences ventures. From that perspective, he is a visionary. He understands that with the right innovation and technology back-up, investment returns can be dramatic,” says Sengupta, an assistant professor of medicine and health sciences at Harvard Medical School. (Sengupta has founded four companies in the pharmaceutical and biotech space.)
Typically, in the Indian life sciences and biotech startup ecosystem, an entrepreneur finds it difficult to attract funding during the teething stage. This is due to long gestation periods for projects, a high chance of failure at trial stages, competition from well-funded international companies and patent issues. Ranjan, however, has shrugged off these concerns. Aarin Capital invested Rs 10 crore in Vyome and Ranjan has made a similar investment in another of Sengupta’s ventures, Invictus Oncology.
The billionaire investor has assured the Harvard professor that he’s in it for the long haul. Ranjan is also known to be a hands-on investor, who likes regular meetings and updates. But discussions are not centred only on toplines and profitability. “Instead, we discuss how this investment will change the ecosystem in the space we operate,” says Sengupta.
Apart from health care, Ranjan and Mohandas are planning to launch two new funds, one of which—Singular Capital—will invest in midcap-listed stocks. The other will be a derivatives fund with an estimated corpus of about Rs 20 crore. They are also anchor investors in Zodius Advisors, an India-centric digital media and financial services business launched by businessman and WNS Global co-founder Neeraj Bhargava, as well as US-based Tandem Habit 3, which looks at startups specialising in social media, mobile, analytics and cloud-related businesses. In June 2014, Exfinity—an early-stage venture capital fund that Ranjan has backed—invested in three technology startups with a corpus of about Rs 100 crore.
His investment choices are independent of MEMG’s core businesses. “Aarin is Ranjan’s personal wealth being deployed in cutting-edge ideas. He wants to work with innovative startups and help them build successful ventures,” says Deepak Natraj, managing director, Aarin Capital.Family ties
By diversifying into education and health care in early 2000 and later immersing himself in the Indian startup ecosystem, Ranjan has been able to predict new trends and stay ahead of most of his competitors. It’s one of the reasons why he has been able to attract investors to MEMG. His vision for his company helped raise the first round of PE funding of $90 million (including $70 million in education and $20 million in health care) in 2006 from IDFC Private Equity and Capital International Private Equity Funds. In 2010, Premji Invest invested in the company, followed by Catamaran Ventures, Infosys co-founder NR Narayana Murthy’s private investment firm, in 2011. By 2013, all four investors had exited profitably.
Ranjan’s investment portfolio is varied, the family trust is thriving and MEMG is growing. But the very nature of his areas of interest—health and education—means that he has inherited a unique set of roadblocks tied to government policy. The challenges Ranjan faces range from policy paralysis to regulatory restrictions in formal and higher education.
His greatest challenge, however, is not expansion and increasing profits or even ensuring that his investments in various startups are reaping rewards. It’s his family. “I find it hard to stay away from my phone and emails. My daughters (Sanya, 5, and Rhea, 3), and (wife) Shruti get very angry with me,” he says.
To that end, combining business with family makes perfect sense as well as sound investment logic. Last year, he acquired his wife’s catering business, Chef on Wheels, for an undisclosed amount. It is now part of Manipal Integrated Services. “I’m happy with the acquisition,” he says. And his wife? “Let’s just say she’s happy, too,” he says with a grin.
(This article is excerpted from the Forbes India 16 October, 2014 issue. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)