TPG-Temasek, IVFA in final negotiations to buy KIMS hospital

PE investors Ascent Capital and OrbiMed Advisors will sell their combined 40% stake in KIMS, while the promoters will dilute an additional 25-30%


KIMS runs a 650-bed hospital in Thiruvananthapuram and a 185-bed hospital in Kochi, a 600-bed KIMS Al Shifa in Perinthalmanna, and a 90-bed hospital in Kottayam.
KIMS runs a 650-bed hospital in Thiruvananthapuram and a 185-bed hospital in Kochi, a 600-bed KIMS Al Shifa in Perinthalmanna, and a 90-bed hospital in Kottayam.

A consortium of global private equity funds TPG Capital and Temasek Holdings Pte Ltd, and India Value Fund Advisors (IVFA) are separately in advanced discussions to buy Kerala Institute of Medical Sciences (KIMS), a hospital chain operating in Kerala and West Asia, two people aware of the development said.

Ascent Capital Pvt. Ltd and OrbiMed Advisors LLC, private equity (PE) investors in KIMS, will sell their combined 40% stake, while the promoters will dilute an additional 25-30%, valuing the hospital chain at $400 million (Rs2,670 crore), said the first person, who spoke on condition of anonymity. Out of 8-10 global funds which were in discussions with the existing investors, two potential buyers got shortlisted a week ago, he added.

IVFA is likely to join hands with one of its investors (limited partners) for the buyout and the discussions are on with investors such as Canada Pension Plan Investment Board and ADIA (Abu Dhabi Investment Authority), said the second person, also requesting anonymity. The deal is expected to close by early next month, second of the two people said. Investment bank Rothschild is advising the exiting PE investors in KIMS.

Blackstone, TPG Capital, Temasek Holdings Pte Ltd, Baring Private Equity Asia and IVFA are among firms interested in KIMS, Mint reported in March. Existing investors OrbiMed and Ascent Capital had acquired stakes in KIMS in early 2012.

KIMS runs a 650-bed hospital in Thiruvananthapuram and a 185-bed hospital in Kochi, a 600-bed KIMS Al Shifa in Perinthalmanna, and a 90-bed hospital in Kottayam, apart from several multi-specialty hospitals in Bahrain, Oman, Dubai, Saudi Arabia and Qatar.

Spokespersons for TPG Capital, Temasek and Rothschild declined to comment. Mails sent to Vishal Nevatia, managing partner at IVFA, Dr M.I. Sahadulla, chairman and managing director of KIMS, spokespersons at CPPIB, ADIA, Ascent Capital and OrbiMed went unanswered.

A consortium of TPG Capital and Temasek was one among the two final contenders for acquiring Hyderabad-based CARE Hospitals, which was finally sold to Dubai-based private equity investor Abraaj Group in January.

Large private equity funds are active in Indian healthcare sector due to its vast growth potential. The healthcare delivery system in India will need to add 3.6 million beds, 3 million doctors and 6 million nurses over the next 20 years, according to a January 2015 PricewaterhouseCoopers’s report. This will require an investment of around $245 billion, it said.

Funds like TPG, IVFA and Temasek already have a wide exposure to the Indian hospital industry. TPG Capital already owns a significant minority stake in Manipal Health Enterprises Pvt. Ltd, which the US fund acquired in February 2014 for Rs900 crore.

In July, TPG Growth, the growth investment fund of TPG, acquired Bengaluru-based Rhea Healthcare Pvt. Ltd, which operates a network of mother and child care centres in India under the Motherhood brand for $33 million.

IVFA, which runs five India-focused funds with a combined corpus of over $1.8 billion, is an active investor in hospitals, The fund holds a minority stake in Manipal Hospitals with an investment worth invested $100 million, made in 2012. IVFA owns a minority stake in Bengaluru-based Kids Clinic India Pvt. Ltd, which runs maternity and infant care hospitals under the brand Cloudnine, for Rs400 crore.

Temasek owns minority stake in Bengaluru-based HealthCare Global Enterprises Ltd (HCG), one of the largest cancer treatment hospital chains in the country, which the Singapore-based fund acquired in 2013.

India has only 1.3 hospital beds per 1,000 people, significantly lower than the World Health Organization (WHO) guideline of 3.5 beds, the report said. India’s bed density is also the lowest among BRIC (Brazil, Russia, India and China) nations, according to the report.

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