Going public: tycoon BR Shetty

Indian-born BR Shetty turned the meagre $7 with which he arrived in the UAE in the 1970s into a personal fortune estimated at $1bn. In a rare interview, he tells Arabian Business about new plans for the businesses that made him rich - NMC Health and UAE Exchange - revealing little sign of slowing down at 70 years of age
BR Shetty says NMC is pleased with its strategic expansion into Saudi Arabia, which has the largest healthcare market in the region.
By Sarah Townsend
Fri 09 Dec 2016 12:59 AM

In 2011, as skincare brand Nivea marked its centenary with a string of parties across the world, Indian billionaire BR Shetty hosted his own private celebration in his extraordinary apartment in Dubai’s Burj Khalifa.

No humble pied-à-terre, this pad occupies the entire 100th floor of the tallest building in the world — not bad for the former pharmaceutical salesman, who was one of the first people to sell pots of Nivea cream in the 1970s when he arrived in Abu Dhabi with just $7 in his pocket.

“Can you believe it? An ordinary salesman of Nivea, who celebrated the centenary in the tallest building in the world with 100 distinguished guests including board members. It’s a good story and it will go down in the history books,” BR Shetty proclaims without a trace of humility in an interview with Arabian Business in Dubai.

The astute businessman and trained pharmacist can be forgiven for a touch of self-pride. After all, he has built his two main ventures — NMC Health and UAE Exchange — from scratch into successful global firms with multimillion-dollar annual revenues.

Today, he is chairman of UAE Exchange and executive vice-chairman and CEO of NMC Health, and both companies are going from strength to strength. NMC was among the top 10 best performing stocks on the London Stock Exchange (LSE) last year, while UAE Exchange is expected to go public after its merger with UK-based exchange company Travelex is completed in 2017, following a $1.2bn takeover in 2015.

Shetty is a well-respected figure in the Gulf’s Indian expat community and has featured among the top six in Arabian Business’ annual list of the richest Indians in the GCC for the past several years.

He is in an upbeat mood when we meet at the Jumeirah Beach Hotel in November, shortly after he was awarded an honorary doctorate from Middlesex University Dubai for his contributions to the UAE healthcare industry.

NMC acquired Sharjah-based Dr Sunny Healthcare Group this year.

Referring to reports of economic slowdown in the Gulf, he says: “Anyone that says the UAE is not going well — do not believe them. I am very optimistic about this country. It has grown, flourished; it is a role model for the entire world and people will always come to invest here.

“The economy is good. Who says ‘slowdown’? The country still has billions of dollars and it has been a long time since it depended on oil alone. This was [UAE founder] Sheikh Zayed’s vision, and it is the way [today’s rulers] are expanding the country.”

That being said, he admits the region’s healthcare sector is lagging at the moment, with a shortage of hospital beds and high-skilled doctors. A report by investment bank Alpen Capital in February claimed that hospital bed penetration across the GCC to 2012 fell well short of the global average, at 17 beds per 10,000 people compared to 27 per 10,000.

Looking ahead, demand for hospital beds is expected to rise by almost 3 percent each year, to reach 13,800 beds by 2020. “This disparity suggests that the healthcare infrastructure development in the GCC is slower than the growth of its population,” the report said.

Governments in the region are taking steps to address the gap. Kuwait this year unveiled a major healthcare strategy to cut the high levels of outbound medical tourism. In the UAE, said Alpen, spending on healthcare is forecast to reach $19.5bn in 2020, up from $10.7bn last year — meaning there are significant opportunities for NMC Health, and other providers.

NMC Health, which listed on the London Stock Exchange in 2012, operates a network of 40 hospitals and other care facilities across the GCC and beyond, in India, Nepal, Egypt, Europe and South America. In total, the company has 1,135 beds around the world and accounts for 26 percent of the UAE’s private healthcare beds.

NMC Health provides services to around 2.5 million patients in the UAE annually.

Shetty, who still owns 25.7 percent of NMC Health, notes that Alpen “is a company with business interests” and its findings are not based on official figures, but says government contacts have told him there is a shortage of beds and they are working to increase provision. “There is a significant gap in the private sector and I am planning to fill it,” he states.

NMC has made eight acquisitions since its listing. Most recently, in August it bought a 70 percent stake in As Salama Hospital in Al Khobar, Saudi Arabia, for $28m, and a 67.5 percent stake in another facility in Jeddah.

Both are in the long-term care sector, viewed as being highly profitable while low oil prices restrict governments’ abilities to provide services for the elderly and vulnerable. NMC already operates 146 long-term care beds in the UAE, but this was its first foray into the Saudi long-term care segment. These two acquisitions will provide another 260 beds, the company said in August.

In March, the company opened its $200m NMC Royal Hospital at Khalifa City in Abu Dhabi, the first hospital to be built on land awarded by the government of Abu Dhabi as part of the emirate’s Vision 2030 plan. The 75,000 sq m facility is the largest private sector hospital in the UAE, NMC claims, with 500 beds and a laboratory and emergency department.

Meanwhile, in October, the company announced it was preparing to enter Qatar and Oman by the end of this year. Shetty says: “I am making a big play at Doha and taking Muscat very seriously too”. Deals have yet to be finalised, but the company is approaching the final stages of negotiations, focussing on specialised services such as fertility and rehabilitation.

NMC acquired Sharjah-based Dr Sunny Healthcare Group this year.

Shetty reveals he is also starting to eye the medical device sector, with plans afoot to invest in kidney dialysis and other device manufacturers, in India initially.

He says he is “really selective” when making acquisitions, but that his credentials in operating a string of hospitals with average patient satisfaction rates of 92-94 percent put him in a strong position “to manage any hospital, anywhere in the world”.

NMC last November pulled out of the $2.2bn bidding contest for its London-listed rival Al Noor Hospitals, with Shetty saying at the time that the valuation had not matched NMC’s expectations.

“I am hoping to acquire a hospital in London, if there is one available; we have already acquired in Barcelona, Denmark, Brazil, India, and Serbia.”

The latter in Belgrade is a huge project, with plans comprising a 600-bed hospital, paediatric facility, nursing college, catering and hospitality wing and a wellness centre and spa. At the time of writing, Shetty was expected to travel to Serbia to conclude the deal within the ensuing days.

Acquisitions are not limited to hospitals; NMC has also bought other healthcare service providers as part of its expansion, such as the London-listed, Abu Dhabi-based Americare Group, and Sharjah-based Dr Sunny Healthcare Group last April.

Lack of skilled professionals is another issue affecting the Gulf healthcare sector and Shetty plans to open a health-focussed education hub in Dubai to meet growing demand. “There is a big opportunity to further education in the GCC healthcare sector,” he says.

The group invested $200m in NMC Royal Hospital at Khalifa City.

“There is still a big skills gap. We need local doctors. We have 203 nationalities in this country alone and we need colleges to cater to each community.

“This is a gap I want to fill and I am hoping to start a medical city, with medical colleges, nursing schools, research hospitals, pharmaceutical colleges, teaching facilities for technicians and… all these things. The Crown Prince [of Dubai, Sheikh Hamdan Bin Mohammed Al Maktoum] and Sheikh Mohammed [Bin Rashid Al Maktoum, Vice-President of the UAE and Ruler of Dubai] have already granted me the land, but we are waiting for the Executive Council to approve the plans. I’ve been to a few meetings but I don’t know when it will happen, it can take time to get permission.”

Beyond regulatory approvals, Shetty boldly says there are few impediments to his growth plans. “We’ve got surplus funding, not that I’m telling you I’m rich, but [NMC] is a listed company, our value has gone up almost 700 percent since we listed and I had the best performing stock in London for 2015.

“We have an open budget, there are no talks with banks at the moment, and fortunately we are liked by the stock market, by partners, by well established companies across the world — they are all saying, give us a chance to invest with you.”

NMC reported its highest revenue growth on record in its half-year financial results in August. Revenues increased by 46.9 percent year-on-year to reach $578.3m, while earnings before interest, tax, depreciation and amortisation (EBITDA) rose 68.2 percent to $115.9m. The company also reported a 48 percent year-on-year increase in adjusted net profit over the same period, to $67.8m.

Yet Shetty insists: “I never make hospitals to make money.” Although he supports countries such as Kuwait that are introducing mandatory health insurance to privatise the market, on the flipside, it can lead to healthcare providers “charging unnecessary bills, doing unnecessary operations, asking for unnecessary investigations”, he says.

UAE Exchange is one of the leading money transfer companies in the UAE.

“Hospitals [and other facilities] should not be moneymaking enterprises,” Shetty says. “My concept is Sheikh Zayed’s concept: providing quality healthcare for all at affordable costs. Our first job is to serve the locals; money will follow.”

In his case, it has. But with shareholders to keep happy, what is his strategy for continued profitability? It is surprisingly simple, he says. “I will continue in the same way, carry on doing the same thing. If you don’t keep charging, you will kill yourself, for sure, but we will not charge higher amounts. Instead, we will open more and more facilities, increase the number of patients; turnover will be bigger [and] profit will increase accordingly.”

With three killer diseases on the rise in the GCC — diabetes, heart ailments and cancer (all down to poor lifestyle, bad diet and lack of exercise, according to Shetty) — he will likely have his work cut out for him for some time yet.

We move on to discuss UAE Exchange, the foreign exchange business Shetty established in 1980 to provide remittance services to the UAE’s large Indian expat community. Three decades on, it has expanded its network to over 800 exchange houses across 31 countries.

The company is private, so Shetty will not disclose financial details other than to say turnover reached $30bn in 2015. However, this privacy may not be the case for much longer. In 2014, a consortium of UAE Exchange shareholders, including Shetty’s Centurion investment vehicle, acquired UK-based currency house Travelex for $1.2bn. Under plans first mooted in 2015, the two exchanges are to merge and their holding company United Global will go public on the LSE.

The planned listing has now been confirmed for the third quarter of 2017, Shetty says, with at least 30 percent of the company’s shares to be put up for sale in an initial public offering (IPO).

He chose the LSE due to the “high quality of its investment regulations” and solid market capitalisation. In April this year, United’s shareholders secured an $890m loan intended to support plans to grow the merged exchange.

UAE Exchange president Sudhir Shetty is aiming to develop services that would appeal to younger customers.

UAE Exchange president Sudhir Shetty tells Arabian Business in a telephone interview that the merger would create “the world’s largest [currency exchange] retail network chain entity”. Travelex has 1,500 retail outlets in around 29 countries across the world, in addition to 2,500 ATM locations. Yet this is only the bricks and mortar side of things, Sudhir says.

“The younger generation want everything to be online, so we are equipping our organisation to meet the demands of the next generation of customers, whether it’s a mobile app or other online remittance facility,” Sudhir says.

“We already have Moneytoindia.com and we recently acquired [money transfer website] Remit2India.com, which has a very decent customer base, more than 500,000 users. We are also producing a mobile app, but are awaiting the necessary regulatory clearances from the UAE Central Bank.”

This technological shift is a huge opportunity for the business, BR Shetty says. “I don’t think it will make things tougher. It will mean that if you want to send the money ‘now’, it can be received ‘now’ too, at no extra cost. Companies like Western Union will vanish, it takes too long and they are operating at too little a margin for the transfer. Our competition is gradually fading away.”

It is a far cry from the early days of UAE Exchange, when Shetty recalls it took “two to three days of just standing in a queue to send 2,000 rupees back home”.

Now in his 70s, Shetty is proud of what he has achieved in business and society. “My mother, when I left home, she told me, ‘do whatever you want to do, but in it all, reach out to the community and serve them’. So these are the three things I am doing to help the community — healthcare, remittances and education [with eight schools serving 25,000 students in the UAE and plans to open more across the GCC].”

Perhaps now he will look to buy an apartment in what is set to become the new tallest building in the world – Emaar’s Dubai Creek Tower? He refuses to comment, but it is clear he is extremely attached to his Burj Khalifa abode. “People keep offering to buy it from me but I will not sell. Never again will there be such a building in the world. It is my favourite place.”

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