The Altruist

Life insurance, health insurance, healthcare, all are businesses of social good, enhanced life or good life. They are businesses no doubt, but the model is of reasonable profits and
not profiteering.”

• 1998 Starts thinking of new business ideas.
• 2000 Sets up Max New York Life Insurance.
• 2001 Opens first Max hospital in Panchsheel, New Delhi.
• 2005 Floats Max Neeman International, a contract clinical research firm.
• 2008 Enters into a health insurance joint venture with Bupa Finance Plc of London.
• 2009 Commits Rs 50 crore towards the setting up of a second campus of ISB at Knowledge City, Mohali, Punjab.

***

The Opportunist

This (buying Vodafone shares again in 2006) was opportunistic. It is an investor’s interest rather than an operating interest. Hutch is a very close friend and now Vodafone has
also become a very close friend...

• 1998 Sells 41% in Max Touch (now Vodafone Essar) to Hutchison and Kotak Mahindra Group for Rs 561 crore.
• 2005 Over a period of time, sells out his remaining 10% holding in the company.
• 2006 Buys 7.6% stake in Vodafone from the Kotak Mahindra Group in March.
• 2007 Analjit’s transactions come under scrutiny of the Finance Ministry.
• 2009 Sells 3.7% in the company for Rs 533 crore. Deal under Foreign Investment Promotion Board (FIPB) scrutiny.

***

Analjit Singh is a man of many accomplishments. He has fine taste and an elegant, almost impeccable demeanour. Everything in his life is just as it should be. His businesses: all Max India group companies are run by professional CEOs. His family: his three children know exactly what their role in the business is going to be. And of course, there are his two Golden Retrievers that bask in his picture perfect 15, Aurangzeb Road mansion in New Delhi. Everything is in harmony, except that, for 11 years now, he has been leading two lives that are utterly in conflict with each other. In one life, he has been an opportunistic trader—buying and selling shares in Vodafone Essar (originally promoted by him as Max Touch in 1992). In another, he has been the resolute value investor—patiently building a whole portfolio of long-gestation businesses like insurance and healthcare. Analjit Singh is an enigma of incredibly unimaginable proportions. Pardon the liberal use of superlatives.

The first Analjit Singh is the maverick opportunist, a man who built and sold businesses. Max Touch, which went on to become Hutchison Max, and later Hutchison Essar, and is now Vodafone Essar, is the most notable. His long string of transactions in Vodafone shares—selling, selling, selling, buying, and now, selling again…always making a quick buck—can teach even a seasoned day trader a trick or two. He first sold 41% of his 51% stake in Max Touch to Hutchison and the Kotak Mahindra Group in 1998, and made a pile of money—Rs 561 crore to be precise. (Though, with hindsight, the wisdom of that sellout could be questioned.) Since then, he has been a regular trader at the counter, gradually selling his remaining 10% holding in small lots, and then buying back 7.6% from Kotak in March 2006. Again in September 2009, he sold 3.7% for Rs 533 crore. Some of his dealings have been questioned for propriety by the Foreign Investment Promotion Board (FIPB) and the Finance Ministry. Now, he is left with 3.9% of Vodafone Essar equity.

The second Analjit Singh, in stark contrast, is the man who has meticulously built an entire portfolio of long-gestation businesses, all centred around human life. There is Max New York Life Insurance (protecting life), which he floated in 2000 and has since built into the fifth largest private insurer. There is Max Healthcare (caring for life), arguably New Delhi’s finest hospital chain. Then he has Max Bupa Health Insurance (enhancing life) and Max Neeman International contract clinical research (improving life). In all these businesses, he has taken the long, hard route to success…no growing fast, no cutting corners and no quick profits. More importantly, he believes that social good is as important as profits in these businesses.

“Life insurance, health insurance and healthcare are businesses of social good. They are businesses no doubt, but the model is of reasonable profits and not profiteering,” he claims. This apart, he and the group companies are giving Rs 50 crore to the upcoming Indian School of Business (ISB) campus in Mohali.

This is the enigma of Analjit Singh: both his divergent ways of doing business have been going on simultaneously. It is almost like there are two different men running the businesses with vastly different ideologies. Both started at pretty much the same time, in 1998, when he sold the 41% telecom holding and started wondering what to do with the Rs 561 crore he made. Both continue, hand-in-hand, till this day. But the question on everyone’s mind: where does the likely acquisition of a 17% shareholding in East India Hotels (EIH) from the Oberoi family fit in? Is it the Vodafone trader Analjit who is buying these shares or it the long-term value builder? Is it the opportunist or is it the altruist?

The world wonders, but there is no doubt in Analjit’s mind. “I am not a strategic investor entering any business to build ‘trade value’ and exit. That phase (of my life) has gone,” he says. He is quick to add that he doesn’t need the money from the Vodafone exit to buy the shareholding in EIH. He doesn’t speak much about the deal (See box above). “Among all hospital chains in India, nobody lives and breathes customer service and care like the Oberois. The brilliance and elegance of Mr Oberoi is unmatched,” says Analjit.

Wooden Spoon

Analjit Singh started his business life with a raw deal. His father Bhai Mohan Singh, a prominent industrialist of his time, favoured his two elder brothers, Parvinder Singh and Bhai Manjit Singh, in the partition of the family business. “In the family settlement of 1989, the family gold (Ranbaxy) went to my eldest brother Parvinder, the family silver (all the real estate) went to my brother Bhai Manjit. All I got was a factory at Okhla, where I had to offer VRS to the workers from my own pocket,’’ he had told several reporters at that time.

Earlier, in 1986, soon after his return from doing an MBA in Boston, his decision to set up and grow a pharmaceutical business ran aground, because his elder brother Parvinder was already in the same business (Ranbaxy). Even his initial foray into the healthcare business was not a success.

But his fortune turned in 1992. He forged a partnership with Hutchison Telecommunications, Hong Kong, for cellular and radio paging services. In six years, the one-circle operation in Mumbai was valued at about Rs 1,368 crore. Then he sold out, not out of choice.

***

Life Insurers: Top Quartile

	New premium	Market share (%)	Year of lanch
ICICI Pru	545	13	2000
SBI Life	493	12	2002
Reliance Life	435	11	2006
Bajaj Allianz	434	11	2001
Max New York	384	10	2000
Birla Sun Life	369	9	2001
HDFC Standard	360	9	2000
Tata AIG	175	4	2001
Metlife	134	3	2001
Kotak Life	122	3	2001
Others	588	15	2001
Total	4,039

*Individual new business premium in Rs cr for Q1 of 2009-10
Source: IRDA

***

Hutch, his 49% equity partner at that time, refused to go along with his ambition for a national rollout (from Mumbai). Hutch was holding back because of the astronomical licence fees and the then prevailing regulatory uncertainties. “It was not just Hutch, but even other foreign players were not convinced about the potential of the Indian market at that time,’’ says a Mumbai-based equity analyst. So, Analjit did the next best thing. “Rather than leveraging (borrowing to grow) beyond a reasonable point, the elegant thing was to move out,’’ says Analjit, who is 55 now. And so, at 44, this much maligned third son, who hardly got anything from the family, saw the first big fruits of his entrepreneurial life.

With Rs 561 crore in the kitty (from the sale of a 41% stake), he could have opted for a rich and lazy retirement. “Honestly, one of the options was to divest (sell) the rest of my businesses and retire,” recalls Singh, sitting in his mansion. “But six to eight months in the game, I realised there was unfinished work to do.” That was the turning point. The trader discovered the merits of value investing. The opportunist became an altruist. He got into life insurance and healthcare soon after that.

Double Life

Over the next few years, he kept selling small lots of his holding in Hutch at prices that kept progressively climbing in tandem with the great Indian telecom story. Presumably, he used the money to fund his new businesses, both of which guzzle capital.

And even as he was busy making these opportunistic trades, some of which even came under government scrutiny, Analjit took a studiedly different and long-term approach with his new businesses. Even though Analjit chose insurance and healthcare for their intrinsic profit-earning capability, they also serve the cause of national interest and social wellbeing. “The driving factor for Analjit was a sense of social or moral responsibility,” says Dr Parvez Ahmed, Managing Director, Max Healthcare, Analjit’s senior at Boston University, and a family friend. “If you look at it from an industry perspective, there are other industries that don’t give you the kind of heartache that healthcare does (but have equal profit potential),’’ he explains.

Says Analjit: “When I began this in 1999, there were four sectors I looked at, not two. They were insurance, healthcare, education and hospitality. It was a coincidence that we started with insurance and healthcare, and within two years realised how big this opportunity was. It left me with no management bandwidth and capital to chase the other two. I realised I could not do much in education as an entrepreneur, so I got involved from a governance side.” He is the Chairman of the Board of Governors of Doon School and a founder member of ISB Mohali.

Max India, along with three other business groups (Sunil Bharti Mittal’s Bharti Enterprises, Pawan Munjal’s Hero Corporate Service and Atul Punj’s Punj Lloyd), have joined hands with ISB, Hyderabad and the Punjab Government to set up a second campus of ISB at Knowledge City, Mohali, Punjab. The Max Group will contribute Rs 50 crore of the funding of Rs 200 crore for the project.

Analjit does not call his interests in education entrepreneurial; neither will he term it philanthropic. “It takes a lot of money to be invested in the education sector, but we cannot expect returns on the entire amount. A gift or donation will always be there.” This side of Analjit is a marked contrast from the Analjit who comes under government scrutiny for his dealings in Vodafone.

Marathon Runner

Analjit runs Max New York Life and Max Healthcare with the mindset of a marathon runner. In both companies, he has shunned greed, short-term profit and quick-fix growth strategies.

The current Ulip regulations say the risk coverage should be at least five times the annual premium. We might be reaching 18-20 times.Rajesh Sud, CEO, Max New York Life

His vision was to be India’s most admired life insurance company. Not necessarily the biggest. “Service excellence is the key,” says Analjit, “even if it means sacrificing market share.” He is content being among the top five in a market that has as many as 23 life insurers. “I am happy if we can achieve a certain critical size needed to attract and retain the right talent,” Analjit says. “Being number one in the league tables is not the most important thing. After all, Southwest Airlines is not the number one airline. But all airline companies want to emulate its business model. Why?” He then proceeds to stitch together a connection with the Oberoi deal. “The Oberois are not the biggest hotel chain in India. But they are in the top quartile,” he says.

Analjit is building Max New York Life (a 74:26 joint venture with US life insurer New York Life) against stiff odds. Even though it was among the first private insurers to set up shop, it trails ICICI Prudential Life, SBI Life, Reliance Life and Bajaj Allianz Life in terms of the number of policies sold and premium collected (See table: Top Quartile). The odds have evened out just a bit recently—New York Life has emerged from the US recession as the largest insurer in the country.

***

Hospitals: Value Proposition

	Year of launch	Hospitals	Beds	Revenues (Rs cr)	Net Profit (Rs cr)	Market Cap
Fortis Healthcare	1996	29	3,330	630.7	24.1	3,301.4
Apollo Healthcare	1979	43	7,800	1,483.2	118.1	3,290.6
Max Healthcare	2001	8	700	320.3	47.6	Unlisted

FInancials for 2008-09 Source: CMIE, company websites

***

Insurance is not an easy business to stay committed to. Profits take a long, long, long time to come by. “In this business, the more you sell, the further you are from breakeven,” says Rajesh Sud, CEO, Max New York Life. Sud came from Bank of America, along with Anuroop (Tony) Singh, the first CEO. “Fundamental to this business is that the recovery of any money happens only after three to four years of a product being sold. For every rupee we are selling, we are incurring a loss for many years,” he adds. Pointing to the 75% annual growth rate the company has sustained in the last eight years, he says Analjit is prepared to bear these early losses in larger, longer interests. But this is not charity. “If we add up the profits that will come in the later years, it more than makes up for the losses in the initial years,” he adds.

More than the willingness to take losses upfront, what’s distinguished Max New York Life is the way it does business. “There is no fine print or asterisk (in our policies) that says: conditions apply. No agent does mis-selling or discounting in the market,” says Analjit. “We have been reshaping industry standards.” This is evident in healthcare too. “You will not find anyone in the market who got a kickback because he referred a patient to Max Healthcare,” he adds.

The driving factor for Analjit was a sense of moral responsibility. There are other sectors that don’t give the heartache that healthcare does.Dr Parvez Ahmed, MD, Max Healthcare

Max New York Life took a conservative and contrarian approach in another area, at least initially. For a few years, it shunned unit-linked insurance plans (Ulips), where the premium is invested in equities with a view to earning greater returns. In 2004, Ulips accounted for 40% of total policies sold in the industry. Max New York did not sell a single Ulip. But it succumbed later, in order to keep up with the competition, though it claims to be providing a higher protection. “The current Ulip regulations say the risk coverage should be minimum five times of the annual premium. If you look at our total portfolio, we might be reaching 18-20 times, and that’s way beyond industry standards,” claims Sud. Ulips now account for 54.8% of Max’s total number of policies, followed by whole-life policies (18.6%) and endowment policies (12.1%).

Initially, the company lost out on growth also because it chose an advisor-led distribution strategy. While this enabled it to serve customers better, tailoring policies to their unique needs (it has 400 possible variations on its policies), rivals sold standardised policies faster and in larger numbers.

The Business Of Health

Analjit’s healthcare strategy is not very different from insurance. Here, Max Healthcare has eschewed a national rollout, franchising for faster growth and buyouts, all in order to build service excellence. Unlike his nephew, Shivinder Mohan Singh, Managing Director of Fortis Healthcare, Analjit does not believe that it is necessary to be a market leader or even have an all-India presence to raise the bar.

Hospitals in India have focused on medical excellence, but often ignored service. While the quality of doctors and surgeries, among others, is good, the focus on pre- and post-operative surgeries is often found wanting. Explains Analjit: “When a person walks into a hospital, he is a patient. But as soon as the surgery has gone well, the fear is gone, and he becomes a customer.” This focus has caused Max Healthcare to grow much slower than Apollo and Fortis. That is also the reason it has restricted itself to the national capital region (NCR).

That is also why Max Healthcare has not taken the franchising route, fearing this would dilute the patient or customer experience. “We don’t want to adopt the Apollo franchisee model. That is not our strategy,’’ says Max’s Ahmed. The mantra, as Analjit points out, is to package medical and service excellence in specific areas like cardiac, orthopaedics and joint replacement, neurosciences, organ transplant obstetrics & gynaecology, where Max Healthcare has an edge. And to limit itself to the NCR geography, for the next few years, at least.

All its eight hospitals today—six super-speciality and two multi-speciality hospitals, with 770 beds and 1,200 physicians—are greenfield projects. Even the other seven coming up, in the NCR and outside, will be new ones. Most of these hospitals will be running by 2012-end, whether they are in Dehradun, Mohali, Bathinda, Greater Noida or Delhi.
Similarly, it is this “quest for excellence’’ that is preventing the company from taking the inorganic growth route. When Wockhardt Hospitals was on the block, Analjit showed no interest. Apollo made a bid and then backed out, terming the deal as too expensive. It was finally lapped up by Fortis Healthcare. “The problem with an acquisition is retrofitting, something that we would not like to get into,’’ says Analjit.

What’s left unsaid is that anything Analjit has not built will not meet his trademark elegance, which is always in evidence, in his demeanour, in his business and in his home. His Aurangzeb Road mansion is complete with perfectly-manicured lawns and extensively landscaped garden, meticulously laid-out designer furniture on shining white tiles, the sprinkling of paintings and tastefully picked Chinese artefacts. But more than just his elegance, Analjit would like to be remembered as an altruist. And he would like the world to forget his other life, as an opportunist.