Changing money, saving lives

It was the life that most Indian IT professionals only dream of — a well-paying job and permanent residentship in the US. In 2002, Sudhakar Jayaram had all of that — a cushy job in the US and a green card. Yet, the then 32-year-old had a nagging feeling and yearned to go back to his roots. In 2004, he called it quits and landed back in India. During a casual conversation with his friend, Jayaram heard of the hugging saint Mata Amritanandamayi and decided to find out more about her. He didn’t have to wait too long, as the devastating tsunami of 2004 drew Jayaram closer to the Mata Amritanandamayi Trust, which was actively involved in the rehabilitation of affected villagers. “I, too, had a tough childhood and my engineering degree was the outcome of somebody else’s benevolence. Here was a chance to pay it forward in my own way,” he recalls. 

Soon, Jayaram found himself spearheading the trust’s broadcasting initiative Amrita TV and its super-specialty hospital at Kochi. But in 2010, he quit the assignment to take care of his ailing father in Mumbai. In the city, Jayaram began freelancing as a consultant and one such assignment was for CP Krishnan Nair of the Leela Group. Around the same time, BR Shetty of Dubai-based NMC Healthcare, whom Jayaram had first met when he was with the Amritanandamayi trust, called him for a meeting at The Leela in Mumbai. Over an hour-long tête-à-tête, Shetty spoke to Jayaram about his plans for India. A couple of months later, Jayaram got a call from Shetty and he said he was flying down to Thiruvananthapuram and wanted to meet him. 

On that fateful day, just as Jayaram landed at the airport, he got a call from a close friend who wanted him to meet his critically ill father. That unplanned detour saw Jayaram miss his appointment with Shetty. When he finally headed home to Mumbai, Jayaram found himself being upgraded to business class and as luck would have it, Shetty and his wife boarded the same flight and settled down in the seats adjacent to Jayaram. Pleasantries exchanged, Shetty — halfway through the conversation — offered Jayaram the responsibility of handling his company’s initiatives in India.

Five years later, Jayaram has no regrets about the way his professional career has shaped up. Based out of Mumbai, he is Shetty’s man on the ground in India in his role as the chief executive officer of BR Life, which is focused on healthcare initiatives, and BR Academy, an educational and vocational training institute for students, teachers and nurses. “Working for him is exciting and enriching as he has given me complete operational freedom,” says the 44-year-old, who is just back from a flying visit to Ahmedabad. If Jayaram’s journey has been interesting, even more fascinating and inspiring is the rags-to-riches story of 73-year-old Shetty, counted among the richest Indians in west Asia.

Udupi to UAE

The year was 1975. One fine morning, 33-year-old Shetty strode into Syndicate Bank’s main branch in Udupi to clear off the last tranche of the personal loan he had availed of for his sister’s marriage. The then chairman Kalsank Kamalaksha Pai emerged from his cabin and said, “My borrower is now my depositor. My own manager had advised me against sanctioning the loan but I told him [in Konkani] ‘Shambu Shetty [ex-Udupi municipal councillor] cho poot, ek dis paise ditolo‘ [he is Shambu Shetty’s son, he will repay the money one day].” An emotional Pai hugged Shetty, who on that day, deposited ₹25,000 in his savings account.

Forty years hence, the memories are still fresh in Shetty’s mind. “That day I was truly the richest man in the world,” he says. Had it not been for the liability, Bavaguthu Raghuram Shetty, the youngest in a family of three brothers and three sisters, would have probably stayed on in his native town of Udupi as its municipal councillor, just like his father, who was the councillor till 1966. Following in his father’s footsteps — a popular figure who passed away suddenly — Shetty fought the municipal elections and was elected as the councillor of Udupi at the age of 23. He ended up serving the corporation as vice-president for two successive terms. During his tenure, Shetty extensively campaigned against the prevalent scavenger system in the town and brought about major infrastructure improvement by setting up Udupi’s first underground sewage and drainage system. 

A trained pharmacist, Shetty had been running a parallel enterprise — a small pharmaceutical distribution agency. But that business never flourished as Shetty diverted most of the funds and medicines to the needy. It comes as no surprise, then, that Shetty’s popularity ensured that his margin of victory in the two successive civic elections — which he fought with VS Acharya under the banner of the Jan Sangh — was huge. At that time, the Jan Sangh had made inroads into just two cities in the country — New Delhi and Udupi. Interestingly, former NDA prime minister Atal Bihari Vajpayee had campaigned for Shetty along with current PM Narendra Modi, who was then 16 years old. The party went on to win 12 seats, while rival Congress managed to secure just three seats despite the campaigning might of Indira Gandhi and other national leaders. Even today, Shetty has no qualms about revealing his political leanings. “I am proud to say that I belonged to the Jan Sangh,” he says, equally effusive in his praise for PM Modi. “Just watch. He will continue to rule the nation for much longer than five years.”

While Shetty’s political career was on the ascent in the early ‘70s, monetarily he had turned bankrupt. Domestic compulsions soon forced him to change course. His mother’s insistence to pledge the ancestral home to fund his sister’s marriage and his own ego of not letting that happen saw Shetty land on foreign shores. He made it to Abu Dhabi in 1972 with the help of an acquaintance with $8 in his pocket and a suitcase that got stolen within hours of his landing in Dubai. A municipal councillor back home, Shetty saw his fair share of struggles in a new country: sharing a room with other Indian workers with just a pair of clothes on him. Though he had a degree in clinical pharmacy, finding a job in the field was tough as such jobs were reserved for locals. He finally landed his first job peddling a druggist’s excess stock, as the storeowner had a problem with inventory thanks to a perennial leakage in his godown. “I told him that I will personally go and sell the goods to doctors and clinics. He was a bit flummoxed as those days the concept of outdoor salesmen was unheard of given the extreme heat and non-existent road network,” chuckles Shetty. 

With AED 500 in his pocket and a Samsonite suitcase that doubled up as a work table, Shetty lugged around cartons of Nivea, Glucose, Gripe Water and medicines to doctors. In doing so, he got insight into the business and noticed the poor state of affairs of clinics in the region. In 1975, inspired by UAE’s first president, Sheikh Zayed bin Sultan Al Nahyan, who wanted quality, affordable healthcare for all, Shetty set up the New Medical Centre — a pharmacy-cum-diagnostic clinic — with a capital of AED 15,000. Abdulla Humaid Al Mazroei, the then minister of labour and social affairs, became his first business partner and continues to remain so. Saeed bin Buti Al Qubaisi, who runs the multibillion-dirham Centurion Investments, is another partner. 

Shetty’s marriage in 1976 to a doctor proved to be the turning point as the business, which started out in a small room, soon turned into a full-fledged hospital, coinciding with the beginning of the oil boom in the Gulf. What also helped was the support from the rulers. The royal family, which till then used to fly to the US for quality treatment, started visiting Shetty’s establishment. Despite opposition from his own finance folks, Shetty went ahead and installed a CT scanner at the centre by borrowing $2 million. He knew that patients in the region travelled overseas for scans and that his move would pay off — and it did. To Shetty’s credit and to his good luck, NMC has been profitable since inception. It is the only company from the UAE to be part of the FTSE 250 after it went public in 2012.

Calling home

Just as his healthcare business was gaining traction, Shetty found an opportunity in the remittance business in the ‘80s. “It was tough to see Indian workers struggling to make a living and queuing up for hours outside banks to send money back home,” recalls Shetty, who went on to start UAE Exchange. What began as a one-branch remittance player is today spread across 750 branches in 32 countries. Incidentally, the UAE Exchange started off as an initiative that Shetty had suggested to his partner. But mismanagement and fraud saw the venture pile up liabilities of AED 18 million. Shetty chose to bail out his partner and the remittance business came under his fold. In line with his gargantuan appetite for taking calculated bets, Shetty in early January signed on the dotted line to complete the takeover of Travelex, the world’s leading foreign exchange specialist, for over £1 billion.

Just about every business that Shetty entered into has had an interesting backdrop to it. What started as a food canteen for patients and the American army during the Gulf invasion soon became a restaurant chain called Foodlands, which has grown into a six-outlet chain. Since the hospital needed sterilised sheets, a laundromat was opened. The other big venture from Shetty is Neo Pharma. To ensure quality drugs, Shetty set up a manufacturing facility in 2003 in the UAE. But that venture was far from easy. The company was allotted barren land, and no banker was ready to fund his project. As luck would have it, the local manager of the Bank of Baroda approached Shetty and informed him that bank’s chairman MD Mallya, Shetty’s classmate, was interested in funding the project. “When all the other bankers refused, only BoB stood by me,” says Shetty, who has since ensured that BoB continues to be Neo Pharma’s only banker. 

Today, Neo Pharma is among the top five generic drug manufacturers in Abu Dhabi to have the manufacturing franchisee and marketing rights for GSK, Pfizer, Merck and Biocon. Though not significant, Shetty also has an eclectic mix of businesses that include a maintenance company, consumer products maker, manpower and equipment provider for the petroleum industry, a school chain called Bright Riders and a hotel chain by the name of Lotus. Even as his empire is gaining critical mass in west Asia led by NMC Healthcare, Shetty — in his own personal capacity — is pursuing a business agenda back in India that will see him emerge as a significant player in the healthcare business and in banking if UAE Exchange manages to get a nod from the Reserve Bank of India.

 Bird’s eye view

On a clear day, they say you can see forever. That’s precisely what the 100th floor of Burj Khalifa, the world’s tallest building, offers — an unhindered view of Dubai’s expanse. Sitting in his swanky residence, Shetty thinks back to the day he was invited to book an apartment in the tower. “I had to wait till midnight in a long queue and after the long hours of waiting, I was finally offered an entire floor of three flats.” Shetty bought another floor for his office purposes and the entire transaction was struck at AED 3,000 per sq ft. Though he still resides in Abu Dhabi, it’s his son Binay Shetty who stays at the marquee address, having quit his executive role at NMC to set up a family office. Putting the move in context, Binay says, “As a family business, we have grown quite a bit and it was necessary for us to have a more formal structure in place.” 

And future growth will clearly come from foreign shores. While NMC is expanding in west Asia, targeting the 9 million-odd population in the UAE, it was only natural that the family would have to look at newer geographies to grow its healthcare business. One such geography that Shetty is betting his personal money on is India.

Though he is clearly enthused by the regime change in the country, Shetty points out that his focus on India has less to do with politics and more to do with the potential that the nation offers. India has only 1.3 hospital beds per 1,000 people — significantly lower than the minimum 3.5 beds recommended by the World Health Organisation.

According to a PricewaterhouseCoopers report, given that just 1 lakh hospital beds were added annually in the previous decade, India may fall short by 1.6 million beds by 2034, something Shetty and Jayaram are well aware of. After initial rounds of brainstorming, it was decided that instead of a greenfield project, the company would be better off buying existing assets.

BR Life made its debut by buying Sree Uthradom Thirunal (SUT) Hospital in Thiruvananthapuram, set up 27 years ago by the royal family of Travancore, custodians of the world’s richest shrine, the Sree Padmanabha Swamy Temple.

The takeover was anything but smooth. Though well aware of the strong labour union issues in the state, Shetty bought the hospital. As expected, local unions soon raised a red flag against the new owner, at which point Shetty indulged in some plainspeak. “If you want, I will padlock the hospital and it won’t make a difference to me. I’m standing in front of you today because of the support I got from Keralites back in the UAE [of the 22,000 Indians working with Shetty, 80% are from Kerala] when I was struggling. I thought the best way of repaying that gratitude would be by serving them back home,” Shetty told the striking workers from the podium. That speech did the trick and the workers took off their boxing gloves.

Today, the hospital is on its way to doubling its capacity from 220 beds to 500 beds. Interestingly, in a documentary film released in 2013 on the royal family, Saga of Benevolence, Shetty enacted the role of Dharmaraja Karthika Thirunal Ramavarma, the king who ruled Travancore between 1758 and 1790.

 Revamping healthcare

While the roleplay was a one-off engagement, Shetty is now playing the role of a hard-nosed businessman in real life. On the radar are sick healthcare enterprises and thanks to desperate bankers, he has built a sizable portfolio of hospitals — wholly owned, partially owned and management controlled — in India over the past three years.

“In a country where healthcare is deficient, the reason these units have turned sick is because they focused on the financial aspect instead of looking for ways to deliver safe and efficient healthcare. You get that right, the money will follow,” Shetty quips.

For now, BR Life is concentrating on creating a strong network of hospitals in nearly 100 tier 1 and tier 2 cities, in clusters such as Tiruchirappalli-Thanjavur-Chennai-Karaikudi-Salem-Puducherry, Bhilai-Durgapur-Raipur, Thiruvananthapuram-Kochi-Kozhikode, and Bhubhaneshwar-Cuttack. While the idea here is to create tertiary-auxiliary healthcare hubs surrounded by a secondary and primary healthcare system, the other important aspect is the availability of good faculty and medical colleges. “You need a good supply of doctors and faculty. Also, the cost of acquisition and the revenue that generated per bed has to be reasonable,” says Jayaram.

BR Life has already invested ₹500 crore since 2012 and is looking at an additional ₹1,000 crore to attain a critical mass of around 3,000 beds over the next three to four years; the long-term plan over the next decade is to have over 25,000 beds. And Shetty is ready to loosen his purse strings. “I am not bound by any number. If there is a good opportunity, I will go for it,” he says. Once the business clocks revenue of ₹500 crore, a public listing, too, is in the offing to further fuel growth. But Jayaram is quick to add, “We are not focused so much on listing as we are on ensuring quality healthcare at affordable prices. We have to participate in the cost and benefits of our decisions, which is why we have to make safe medicines by adopting scientific methods of diagnosis. Though NABH standards are in place, hospitals in India can be made a lot safer,” adds Jayaram.

Scientific cost accounting, standardisation of procedures, proper training and aligning with the right kind of doctors are just some of the focus areas that BR Life is working on. Hypothetically, if an open-heart surgery costs around ₹2.5 lakh-3 lakh in tier 1 cities, BR Life is looking at how it can bring the cost down to around ₹1 lakh-1.5 lakh. “These are still early days. Hopefully, over the next seven to eight months, we will be in a better position to get the math right,” he explains. Even as the healthcare initiative gains ground, Shetty has set his sight on manufacturing medicines within the country itself.

 Right prescription

As complex as it may sound, 5-ALA is Shetty’s big bet in India after healthcare. What is 5-ALA? It is an abbreviation of 5-aminolevulinic acid, an amino acid found in the bodies of plants and animals. Japan-based SBI Pharma manufactures products containing 5-ALA, which is an important component used for cancer detection, diagnosis and screening and the prevention and treatment of metabolic disorders. Neo Pharma has got the licence to market and produce the drug in Asia and Africa. To put it simply, if a person consumes a pill containing 5-ALA at night and his early morning urine shows traces of a white substance, prostrate cancer can be confirmed. “It’s harmless and acts as a prophylactic, therapeutic and diagnostic drug,” says Shetty. The drug can also be used in the fight against Plasmodium Falciparum malarial parasites, which is a big challenge in India. The growth of P Falciparum can be inhibited through a combination of 5-ALA and bivalent iron. 

While the mosquito-borne disease kills over 1.2 million people worldwide each year, deaths in India could be more than 45 times higher than the current estimate, according to a study by the University of Washington’s Institute of Health Metrics and Evaluation. Shetty has submitted a proposal to produce the drug at a subsidised cost to the Indian government to fight the disease, which is yet to get back on the plan. Shetty is not wasting time though. “I am already scouting locations for setting up a plant in India,” says Shetty, who has already visited Pune, Ahmedabad, Mysuru and Bengaluru to look for land. The 73-year-old is considering either setting up the manufacturing business under the Neo Pharma umbrella or under a new identity. 

It’s all about money

Outside of healthcare and pharma, Shetty wants to capitalise on his remittance business by foraying into the banking space. Just how big the remittances business has grown for Shetty is evident in the growth of UAE Exchange. Today, it has close to 8 million customers and transfers 6% of total global remittances and over 10% of the total remittances ($71 billion) flowing into India, thanks to its alliances with 150 global banks. Not surprising, then, that despite 138 money changing companies in the UAE itself, UAE Exchange has over 50% market share in the region. “Everyone offers the same product but our technological edge differentiates us,” points out COO, global operations, Y Sudhir Kumar Shetty. UAE Exchange has raised the bar in terms of services by using brick-and-mortar kiosks, smart cards and same-day remittance facilities. One of its new services FLASHremit enables customers to send money instantly to their beneficiaries in India.

If the exchange has succeeded, it is because it got the government to back its services. Earlier, most of the migrants used to get their salaries in cash, as they were not integrated to the local banking system. This meant that companies had to employ a huge army and spend lot of man-hours filling packets with cash and distributing them individually to the workers. Instead, UAE Exchange tied up with MasterCard to introduce the Smart Pay Payroll Card.

Employee salaries can be loaded onto the Payroll Card by companies who join the Smart Pay service and employees, in turn, can access their salary accounts anywhere through the cash dispensing machines of UAE Exchange, using their cards free of charge. Today, over 700,000 disbursements are routed through the exchange every month and there are over 40,000 SMEs registered with the exchange. According to recent statistics from the Wages Protection System (WPS), which adheres to the directives of the UAE ministry of labour and the UAE Central Bank, Smart Pay topped the list of payroll solutions that are offered by remittance brands in terms of volume of
salary disbursals.

What makes the remittance business all the more alluring is the fact that as regulators increasingly clamp down on money laundering, the unorganised market will make way for organised players. And with G8 nations adopting the 5x5 initiative, aimed at reducing the cost of remittance in five years by 5%, players like UAE Exchange need not fear competition from local and foreign banks. [Globally, according to the World Bank, sending remittances costs an average of 7.99% of the amount sent. This figure is used to monitor the progress towards the 5x5 objective, as reduction of remittance prices could save migrant populations up to $16 billion a year.]

“Remittance as a business is hardly lucrative for banks, as transaction fees are just 2% of the principal amount. And if they have to compete for the $3-4-dollar service fee and incur a high regulatory cost to monitor that, banks will not be very happy doing that,” points out Promoth Manghat, VP, global operations, UAE Exchange, adding that since the bulk of remittances from the UAE is done by blue collar workers — who are customers just 12 times a year — there in nothing that is of interest to banks. Building on its technology platform, it has a presence across 33 countries with 730 branches and is now looking at bundling new offerings such as micro credit in markets like Africa. But UAE Exchange, which has over 350 branches in the country, is eyeing a much bigger role in India. After losing out on the initial round of bank licences, it has now reapplied for a small bank licence. 

Clearly, Shetty is willing to wait it out. “I have been insisting for the past 12 years or so that we have to be a bank. We will go to the villages that need money and not to tier 2 or tier 3 towns. When I needed money, I had no one to look up to. There is still a large part of the population that needs a formal banking system and not micro credit institutions,” says Shetty. What gives him the confidence to survive is that his company more than meets the RBI’s conditions for new banks — that they need to have at least 25% of their presence in rural and remote areas. “Our presence in rural areas would be much more than the threshold limit,” he adds. Going beyond the limit has always worked for Shetty, who pulled off the biggest M&A of last year in west Asia. 

“I don’t think I have gone overboard,” he explains, referring to the takeover of the London-based foreign exchange giant Travelex for over £1 billion. “It compliments our existing business of remittance with foreign exchange,” he adds. Concurring with his boss, Manghat elaborates, “UAE Exchange’s customer profile is low- to middle-end, while Travelex offers a customer segment that is upper middle class. We want to bring the two category leaders together — we have done our homework.” Given that the ownership of both the businesses is the same, Shetty is consolidating the holdings under a new company, which will go public in 2016 or 2017. How much of that adds to Shetty’s networth of 3.3 billion is not clear. For a pharmacist who came to the Gulf with $8 in his pocket, Shetty plays down the wealth chatter. “I have never chased money, it came as a consequence of my actions,” he smiles, as the setting sun casts a golden hue across his sprawling apartment.