Rabobank Healthcare Venture Capital Arm Plans to Open Shop

by Anju Ghangurde & Raghu Mohan

Mumbai, Apr 5: Dutch giant Rabobank believes that the opening up of the health insurance sector will translate into long-term gains for the consumer even as it takes off pressure on government healthcare spending. With 300 clients across 20 countries, a healthcare credit exposure of $5 billion and a triple A rating (based on long-term CD and senior debt ratings from Fitch IBCA, Moody's and Standard & Poor's in late 1998), Rabobank is already working on a couple of deals in the Indian market.

In an exclusive interview with The Financial Express, Rabobank International senior vice-president, global business manager (healthcare), Arnold Kuijpers, said that Weispeck Greer, the group's US-based healthcare venture capital firm was also looking at an India entry. Kuijpers spoke on a host of issues including the importance of merging only for the right reasons. Excerpts:

The Budget for 1999-2000 has liberalised investment norms in the pharmaceutical sector and automatical level, it would be ineverybody's interest that the government advocates allowing every initiative that contributes to establishing very broad (ie. accessible to everyone even in the rural area) and appropriate (various products designed for high/low income earners) health insurance for people. It helps people protect themselves against the cost of illnesses.

Besides, with the inability of governments to provide more funds, they will encourage people to use private healthcare. But you can only do this if you have confidence that people have access to this. And if the intermediary is a health insurance company, then there is such a confidence. Moreover, these insurance companies are good buyers of care. They influence the healthcare providers and can assess the quality of healthcare better than the consumer and at reasonable prices. This will make healthcare providers more businesslike and consumer-oriented.

Do you see the process of consolidation gather momentum here, given India's commitment on the rgers are forthe right reasons. If it is merely to increase market share or power, it could be dangerous. For example, in a merger driven by the comfort of strong research and development pipeline...even if this makes sense from the R&D perspective, but does not make sense in other areas, you obviously have to think twice.

A merger by definition should want to combine all segments of the value chain. Currently, however, a more sophisticated approach (with regard to M&A), that is an outcome of a strategy, is being used. So, if the company knows it's competencies, relative weaknesses, how the industry is developing and then fit in the piece of puzzle, it is a different ball game. Corporates are now far cleverer in deciding whether/what to merge/acquire. Besides, now shareholders give less room for managements to think of a merger for wrong reasons.