ITC gets shareholder nod to enter healthcare; Still open to public skepticism

The move of the tobacco giant, venturing into healthcare, has indeed become a matter of skepticism, with many pointing out to the  “dichotomy” of the situation since the company makes majority of revenues by selling cigarettes

Having diversified into FMCG and other businesses, tobacco giant ITC has received shareholders’ nod to enter the healthcare sector and plans to set up multi- specialty hospitals across the country.

The company had sought approval from its shareholders to alter Memorandum of Association of the company to include ‘Healthcare’ through a special resolution on January 27.

The resolution has been passed by the members “by requisite majority”, ITC said in a  recent regulatory filing.

In January, ITC said that its board of directors had recommended seeking shareholders’ approval for the alteration of the objects of the clause of its MoA.

The Kolkata-based firm, for which tobacco still accounts for big chunk of the revenue, plans to set up multi-specialty hospitals and leverage its experience in hospitality for tapping into the expanding medical tourism segment in India.

The board of directors of the company had “recommended exploring and entering the area of health in India by way of setting up state of the art world class multi specialty hospitals”, ITC had said in a notice to the shareholders.

“Such initiative would leverage the company’s repertoire of knowledge and experience in the hospitality and tourism sector and can be used for medical tourism for the country using the multi-specialty world class facilities,” it had said.

ITC will compete with the likes of Chennai-based Apollo Hospitals, Fortis and Max Healthcare which are among the major private players in the sector.

The company is looking at the whole gamut of healthcare.These include business of multi speciality hospitals, medical and health care centres, mobile health centres, nursing homes, diagnostic centres, dispensaries, pharmacies, clinics, laboratories, polyclinics, drug and medical accessories stores.

New Model?

ITC Ltd is not looking to generate shareholder returns from the healthcare venture, even as it seeks to create “new benchmarks in service delivery”, to a former company official privy to the plans informed Mint.

Speaking about the motive behind their initiative in healthcare world, the official told Mint, "Our aim is to create brand new standards in healthcare from various standpoints, including integrity and ethics.

“ITC’s culture and value system is perfectly suited to running hospitals and we will only hire doctors who believe in our value system."Unlike most other private hospitals, ITC plans to pay doctors a fixed salary and no commission linked to billing, he added.

“It will make profits, but profitability is not the main driver—profits are to be reinvested in the business,”

The dominant model in private hospitals in India is to link doctors’ compensation with billing. In the absence of clearly defined clinical protocols and limited scrutiny of bills by insurers, the hospitals often face allegations of malpractices such as over-billing, he said, adds Mint 

The move of the tobacco giant into healthcare, has indeed become a matter of skepticism, with many pointing out to the  “dichotomy” of the situation since the company makes majority of revenues by selling cigarettes