The Indian-owned state of the art Apollo Hospital was taken over by the Sri Lankan corporate raider Harry Jayawardene on Thursday, triggering resentment in Indian circles, which felt that it would send a bad signal to Indian and other foreign investors in Sri Lanka.
The hospital's Indian promoters, Apollo Hospital Enterprise Ltd, (AHEL) sold off their 33.22 per cent stake in the company, accepting Jayawardene's offer of SLRs 28 per share according the Colombo Stock Exchange's Take Over and Mergers Code of 1995.
Two other investors Ratnarajah Navaratnam and Bobby Kundanmal of Sino Lanka Pvt Ltd, who held 3.19 and 5.03 per cent respectively, also sold out, giving Jayawardene's Sri Lanka Insurance Corporation (SLIC) 80 per cent of the shares.
Following the change over, the hospitals Indian staff will have to quit.
Lankan minister slams takeover
However, in the midst of all the hostility towards Apollo, the Minister of Enterprise Development, Rohitha Bogollogama, has come out strongly against the take over.
He warned the new owner Jayawardene that the hospital project would no longer enjoy the concessions given to it by the Board of Investment (BOI).
For example, the new owner would have to pay the market price of the prime land on which the hospital was built, the minister told The Island daily.
"Government specifically, by name, invited this particular investor (Dr Pratap C Reddy of Apollo India) to come to this country and was given incentives under the Board of Investment to generate the level of investment."
But Dr Reddy had to sell his stake under "duress," Bogollagama said.
Though the Executive Director of the AHEL, Suneetha Reddy, had sugarcoated the decision to sell and quit, by saying that it was taken in accordance with its long-term business goals, it is generally understood that the decision was forced by a hostile environment.
Earlier, the Jayawardene-held SLIC had upped its stake in the company from 19.86 per cent to 36.07 per cent, outstripping every other investor.
He then launched a take over bid.
Indian bid to save fails
But the Indian High Commission went all out to save the prestigious Indian investment by appealing to the Sri Lankan government to restrain the politically influential Jayawardene.
The argument put forward was that Apollo hospital was deemed to be a Special Project by the government of Sri Lanka when it was floated.
Dr Pratap C Reddy, its promoter, had come in at the express invitation of the Sri Lankan government headed by President Chandrika Kumaratunga.
It had been President Kumaratunga's wish that Apollo should raise the standard of medicare in Sri Lanka.
And Apollo had lived up to its reputation and inspired other private hospitals in the island to modernise themselves.
The Minister for Enterprise Development, Rohitha Bogollagama, assured the Indian mission that the take over bid would not be allowed as it could send a bad signal to all foreign investors.
He also said that President Mahinda Rajapaksa had assured that the state-owned Bank of Ceylon (BOC) would not sell its shares (about 15%) to Jayawardene.
The Board of Investment (BOI) also took a serious view and said that Apollo hospital would not get the concessions if the ownership changed hands.
But this diktat ran into a controversy, as it was not clear if the concessions were given to the enterprise or to the promoter.
And BOC, which was not expected to sell its stake, was actually non-committal. It was feared that it could let AHEL down.
Even when Jayawardene had no designs on AHEL, the hospital was having difficulties with the Sri Lanka Medical Council (SLMC) and the Sri Lankan government did little to blunt SLMC's machinations.
The government had agreed to let the hospital recruit 100 Indian doctors and 300 Indian nurses.
But the SLMC, which had to approve their visa applications, would sanction only a third of the numbers sought. Getting visa extensions was also a major problem.
Local doctors spread rumours that the Indian doctors were not adequately qualified, by which it was meant that they had no Western degrees.
Fall in standards
A frequent doctor turn over led to patient dissatisfaction and brought down the standard of medicare and diagnosis.
The hospital was also relatively high cost, which kept the hoi polloi away. Apollo was making a loss while other corporate hospitals in Colombo were making money.
In fact, Jayawardene's USP was that he could turn the hospital around, if he took it over.