We chose not to acquire Fortis Health, says Sunil Kant Munjal of Hero Enterprises

Hero Enterprises, an off-shoot of Hero Group, has a diversified business portfolio including steel cold rolling, insurance distribution, residential real estate, auto components manufacturing and a training vertical. Sunil Kant Munjal, chairman, Hero Enterprises, in conversation with Ashish K Tiwari, gives an insight into each of these businesses, pulling out of the Fortis Healthcare deal, impact of regulations on insurance business. Edited excerpts…

Could you briefly take us through the various business verticals of Hero Enterprises?

We are a pretty diversified business group with businesses including steel cold rolling, insurance distribution business that's the largest in the country, residential real estate, auto components manufacturing and corporate training. We don't really talk numbers, so I will not be able to share financials here. We'd rather operate the way we do, very quietly, below the radar and focus on work. The only time we make anything public is when there is a consumer product or if it's anything to do with a listed entity. Other than business, we do a lot of non-business, not for profit activities which ranges all the way from education to healthcare, to the arts, to clean drinking water, to vocational skills. We are quite deeply involved in a number of them. Investing in mutual funds, bonds, private and listed entities is another business that's done through our full-service investment office.

Will steel and insurance be the largest business verticals?

Yes. Real estate is also a growing business. It's a fairly new vertical set up some years ago. Our first project was in Haridwar then we went ahead and set up a project called Hero Homes in Ludhiana and in Mohali. So far, we have not done anything in National Capital Region. We are now in the process of announcing a project in Gurugram. The focus is largely North India, because there's a massive interface with regulation, policies, regulators and each location tends to have different regulations. We follow an unusual business model, in the sense that we develop very moderately priced apartments, but the functionalities are of higher priced apartments. So, in a Rs 50-60 lakh apartment, we are offering attributes that you would normally get in a Rs 5-6 crore apartment development.

How are you able to do that?

It's a difficult task obviously, but we are using a lot of innovations, both, in our design and execution for the real estate business. Starting from the way it's conceived, put together, making interesting use of technology to help us in design, etc. On the execution side, so far we have been able to deliver apartments on time. In fact, we are now trying to see how to deliver it before time. So, we are applying the knowledge gained over many decades of running diverse businesses into each one of these.

You'd also teamed up with the Burman family to acquire Fortis Healthcare. How do you view its outcome?

Yes. In fact, we'd actually got it, but we decided to give it back. In the second time around when we ourselves triggered the rebid we did not make a bid that time. So happy or unhappy is not relevant because we chose not to bid the second time. We were completely ready to acquire it and to run it, but chose not to for various reasons both, inside and outside, which we could see. There are a lot of complications in that entity and we chose not to get involved. Actually, healthcare is a crying need of the country, more than many other things. I would say it's as important as education, as a need for the nation.

How is the auto component business faring?

It's for automaker Maruti. It's a small business. It was a part of the restructuring exercise that we did of the group back then. At this moment we don't see that as one of our large businesses. And we have chosen not to remain in small businesses anymore. In fact, we are asking all of our businesses to figure out a way to grow in a reasonably short period of time. So whether they have to do it organically or inorganically, it will depend on each business and the vertical it is in.

The insurance distribution business is witnessing an increase in competitive intensity. What's your take?

Competition is not really the challenge for us as we are by far the largest player in India. We wrote over a 10.5 million policies last year. We are actually bigger than 10 or 12 of the insurance companies themselves. But we are only a distributor. In the last one year, there have been multiple changes that took place in distribution regulations. What you can do, what you can charge, how you can charge, what you cannot do and so on. All that became very restrictive. I think we missed one point that those distributors who are a large in scale should probably be allowed much more freedom and flexibility. By treating everybody in the same manner, the regulator has actually killed a part of the initiative. You actually restricted the growth, which I cannot understand the logic or reason for. The role of the government and the regulator is to increase and improve penetration in the country. That's one thing our entity has done, it's a part of the corporate service.

When we started, penetration was super low, it's still low, but I think we have increased penetration than literally any other entity in this country ever in its history. We also worked on renewal of insurance of vehicles which never used to happen earlier. We have very recently changed the distribution to the broking licence. We were earlier only doing non-life. Last year we added life and subsequently health insurance as well. So now it's a full service offering.

On the investment business, what's the sweet spot, theme, etc that you follow?

We used to invest in start-ups, we have now stopped doing that and moved up a few notches to growth capital or to existing regular operating businesses. We are investing in both growth and regular operating stages. We don't invest in companies that only require money or financial investor. We invest in entities where, in addition to money, it will take some of our connections, experience or knowledge to help the business grow. We do get involved and engaged in either on the Board or otherwise to help and support companies.

You recently invested in a lighting company...

Yes, Corvi LED Lighting. It's in the process of broadening the offerings and in next three months or so they will have a full range of products available. They have just started three new plants for manufacturing and are also looking to go overseas and start manufacturing next year. We earlier invested in OYO, Nykaa and an investment fund called Aavishkaar.

What's your view on the way OYO has grown? They on-boarded a former IndiGo honcho to lead the business and expansion?

OYO has been very satisfying in the way it has evolved in a reasonably short period of time. It already was growing quite well in India and then it went out and started growing in overseas markets like China, UK and South East Asia. I think Ritesh (Agarwal) will focus on the opening of new markets and the new CEO will focus on the market in and around India. OYO has big support from large investors like Softbank etc. and it's got a nice tailwind. In all aspects the company seems to be developing quite well. Ritesh is a very impressive young man and he is by the way, very genuinely young man.

You also play a very active role in outlining economic and business policy matters…

What we basically do is apply our minds towards looking at policies, regulations in the country. This is done by our MindMine Institute, through a big conference called the MindMine Summit in Delhi every year. It's high profile brainstorming activity and involves ministers, bureaucrats, industry leaders, diplomats, academics, NGOs, artists and students. It's like a microcosm of what goes on in India. As a lead up to the summit we also have smaller summits under MindMine Conversation, which is a closed door interaction. This also serves a lead for building issues, topics and themes and sections that are relevant to India, to Indians, Indian economy, Indian industry and India's global relation. So in essence it's like a 360 degree review of what's going on for all of us in India.

What are the business outcomes that you look from the activities under MindMine?

It is not something that we are looking at for our own business, this is as I said for India so our attempt is to collect, gather and research issues which matter for the nation. We look for pointers in terms of policy, economy, industry etc. and then feed them into the system. Whatever is important for the industry we will try to feed to the industry, what is important for policy making we try and feed it to the government. We have very open discussions on what is working and what is not working so that we can genuinely support India's development and growth.