P.D. Hinduja Hospital, the hospital arm of $25-billion diversified conglomerate Hinduja Group, has joined the race to acquire the Hyderabad-based CARE Hospitals with the backing of private equity (PE) firm Everstone Capital Advisors Pvt. Ltd, according to three people in know of the matter.
The Hinduja-Everstone consortium has submitted a bid to acquire 72% stake in CARE, currently owned by US-based private equity firm Advent International, said the first person.
The deal could be in the range of about $252 million (about Rs.1,600 crore), valuing CARE Hospitals at $350 million (about Rs.2,200 crore).
Headquartered in Singapore, Everstone is an India-focused private equity (PE) fund with assets under management worth $2.5 billion.
A consortium of South African hospital chain Netcare Ltd and Bain Capital Advisors Llc is also bidding for CARE. Others in the race include Baring Private Equity Asia, Malaysia’s IHH Healthcare Bhd and a West Asia-based hospital chain, said the first person quoted above.
In April, Reuters had reported that Advent International is in talks with Carlyle Group, IHH Healthcare, Manipal Hospitals and Fortis Healthcare Ltd to sell its 72% stake in CARE Hospitals for $250-$300 million.
The CARE Hospitals Group, owned and managed by Quality CARE India Ltd, is a multispecialty healthcare provider, with 17 hospitals across nine cities in India and a total bed capacity of 2,400. CARE has a presence in Hyderabad, Secunderabad, Visakhapatanam, Raipur, Pune, Nagpur, Bhubaneswar, Jabalpur and Surat.
Founded in 1997 by Dr B. Soma Raju and a team of cardiologists, CARE Hospitals also runs a network of telemedicine hubs in rural Andhra Pradesh and Maharashtra.
In 2012, Advent acquired controlling stake in CARE Hospital for $105 million from investors including Rakesh Jhunjhunwala, founder of Matrix Labs; Nimmagadda Prasad and UK-based Ashmore.
The remaining stake was held by some of the doctors at CARE Hospital.
If the deal materialises at a price of $252 million, Advent will roughly double its initial investment.
The spokespersons at Hinduja Group and Everstone declined to comment. Advent spokesperson said the firm has no comment to offer. A Bain Capital spokesperson refused to comment while a mail sent to Netcare did not elicit any response.
For Hinduja Hospital, the deal offers an opportunity to expand beyond Mumbai.
“The Hinduja Group has been scouting for hospitals to acquire and expand its presence out of Mumbai,” said the third person quoted above.
Started as a clinic in 1951, Hinduja Hospital has expanded into a multi-specialty, 381-bed hospital in Mahim, Mumbai, under the name of P.D. Hinduja National Hospital and Medical Care Research Centre.
Malaysia-based IHH Healthcare, which is also among the contenders, runs hospital chains across Asia under the name of Parkway Pantani Ltd and has been an active investor in the healthcare sector in India. In March, it bought a 51% stake in Hyderabad-based Continental Hospitals Ltd for $45.4 million.
IHH also owns 11% stake in Apollo Hospital Enterprise.
“The wide presence of CARE Hospitals makes it an attractive asset for PE and strategic investors,” said the second person involved with the deal.
Though a handful of hospitals have been on the block for a while, their presence in just 1-2 cities make them less attractive for investors, he added.
The potential for growth in the healthcare sector has drawn consistent private equity interest.
According to a 2014 report by PricewaterhouseCoopers (PwC), a multinational professional services network, India’s healthcare infrastructure needs an additional 6.5 lakh beds that will translate into capital investment of Rs.1.65 trillion by 2017.
The country’s bed density is still the lowest among the BRIC countries (Brazil, Russia, India and China), and approximately 70% of the available beds are concentrated within the top 20 cities of the country, said the report titled Public-Private People Partnership: Winning in collaboration.
“The penetration is still low and the sector is expected to show CAGR (compound annual growth rate) of at least 12% over the next few years. Combine that with a population that continues to grow, increasing incidence of lifestyle diseases and the opportunity in medical tourism, and that would explain high levels of interest in any scaled healthcare business in India,” said Sanjeev Krishan, leader (private equity and transaction services), PwC.
According to data by VCCEdge, a financial research platform for private markets, about 71 private equity/venture capital deals worth $1.7 billion have taken place in the hospital sector in India since 2012 along with 34 mergers and acquisitions worth $783 million during the same period.
Some of the more prominent deals include the $171 million investment led by TPG Asia Buyout Fund VI in Manipal Health Enterprises Pvt. Ltd in 2014 and $163 million investment by Carlyle Asia Partners III Lp in Global Health Pvt. Ltd, which runs Naresh Trehan-led Medanta Medicity Hospital, in 2013.
In January 2015, Temasek Holdings Pvt. Ltd acquired another 18% stake in Global Health for an undisclosed sum.
(Source: Live Mint)