IHH Healthcare looks to China, India for growth

The world's second-largest healthcare provider by market value, IHH Healthcare, is tapping into the pulse of China and India's demographic trends through acquisitions and joint partnerships.

The Malaysia-based healthcare group, led by Dr. Tan See Leng, operates in over 10 countries with key markets in Singapore, Malaysia and Turkey, and has experienced healthy growth. Earnings before interest, taxes, depreciation and amortization (EBITDA) was up by 13 percent $347 million (1.5 billion Malaysian ringgit) in the first three quarters this year.

It is looking ahead by investing into the potential of economic heavyweights China and India, which will eventually "become [IHH Healthcare's] core markets."

Tan See Leng, managing director and CEO of IHH Healthcare, explains that the company's "objective is to use acquisitions as a main form of growing the company" and build around the acquired platform.

"We tend to acquire companies in markets that we're not familiar with, [therefore] we take on a more subdued role," explains Tan to CNBC's Managing Asia. "We don't start out with the objective of wanting to be number one."

Clearing the last of India's bureaucratic hurdles

It was a busy year of deals for IHH Healthcare, which recently completed the purchase of a 73.4 percent majority stake of India's Global Hospitals, and had acquired a 51 percent stake in Continental Hospitals, which brings the number close to 1500 beds in India.

Tan believes that the service focus in India is on "tertiary quaternary care" which is the area involving complex surgeries and organ transplants, in "upper gastrointestinal (UGI) specializations and hepatobiliary pancreatic type of disorders."

"That's how we separate ourselves and distinguish ourselves from the rest of the players in India," says Tan, who himself was trained as a medical doctor.

He goes on to add that IHH is "clearing some last couple of hurdles" for the opening of its Parkway Pantai 450-bed hospital, which according to Reuters has been delayed for nearly two years.

India has long been known for its bureaucratic red tape, and is ranked 130 out of 189 countries for its ease of doing business. However, Tan is optimistic about the country's demographic trends, which he says still have "lots of runway."

IHH's footprint in China

The other focus of IHH Healthcare's is China, another market which can be hard for new entrants.

Tan explains that typically, IHH's strategy has been to partner local and well-connected firms, such as the State Owned Enterprises (SOEs).

"We can't even work with just one broad SOE, we work with multiple because each of them will have their own relevant expertise in that local city," adds Tan.

The need for a different partner for each city is because "a lot of times even though you have a central policy enacted in Beijing, for it to percolate down to the municipality can takes years," he says.

IHH has nine medical centers in China, but is awaiting the opening of the 350-bed ParkwayHealth Chengdu Hospital which is expected to open in 2017.

China has recently launched a series of policies to support the private hospital sector, including the removal of administrative approval for Chinese medical institutions applications for basic medical social insurance, said Fitch Ratings in a note. The policy helps to improve the affordability of private medical care, and relieves the pressure on the public healthcare sector.

Statistics from China's National Health and Family Planning Commission reveal that the number of outpatient visits to private hospitals accounted for 11 percent of total visits in 2014, an increase from 8 percent in 2009.

Amidst China's economic slowdown, the head of IHH Healthcare is bullish that the private healthcare sector is still "relatively resilient."

"Even in China, two things are certain: death and taxes. And the reality is that in the last seven years of anybody's life, you'll end up being a net consumer of healthcare," he says.

"The gradient of growth [in China] may slow down, but if we're nimble about it and manage our cost and the [productivity] of our healthcare workers, we can still prevail," adds Tan.

The United Nations World projects Asia to be the second largest contributor to future global population growth after Africa, adding 0.9 billion people in the next 15 years, while the share of aging population (those aged 60 and above) is expected to increase from 12 percent in 2015 to 25 percent by 2050.