As India’s oldest and largest private equity (PE) player, ICICI Venture Fund Management Co. Ltd sets the trend for peers in the emerging business space. This time around, the PE firm is raising $250 million (around Rs1,000 crore) to be invested in the country’s burgeoning health care segment.
The funds will be used to roll out multiple networks of hospitals across urban and semi-urban centres, and will also be used to build the firm’s growing interest in allied segments such as pathology laboratories and specialized health care services.
In a conversation with Mint, Aluri Srinivasa Rao, director of investments at ICICI Venture Fund Management, explains how the firm will bring in a strategic partner to channelize further investments into the health care business. Edited excerpts:
What are the dominant trends that led to the launch of a dedicated fund for health care investments?
Iven Medicare is not a fund. What we have done is, (we’ve) launched a new company that will invest in the health care sector. ICICI Venture owns 100% of the company at present, and we have brought in a corpus of $80 million, at present.
What we plan to do is a roll-up strategy, where Iven Medicare will invest in building a network of hospitals that will be administered and run by owner entrepreneurs. We will also bring in a strategic partner who will invest a matching amount of $80 million, and the company will then raise debt funding to build a total corpus of $250 million.
There is a big opportunity to build a health care service with a national footprint. Till now, this sector has largely been unstructured, we now aim to build an umbrella brand that multiple players can operate under.
How many such investments have already been finalized? Could you give us an example?
We have already closed four deals... There are three more deals in the pipeline that will soon be finalized. One of the investments we have made is in the Pune-based hospital group Sahyadri Hospitals, which is almost a decade-old, 300-bed hospital. In the normal course of business, this group would perhaps have moved to other cities such as Hyderabad. But, we spent time with them to develop a hub-and-spoke strategy. The Pune hospital will be expanded to a 1,000-bed unit, and will be fed by a network of tertiary hospitals in more than 17 centres across Maharashtra. These tertiary hospitals will be typically 25-100-bed hospitals, and will be greenfield projects or in places where there are already doctor owners running such units—Sahyadri Hospitals will buy up to 55-60% of the ownership and extend the network. This model will then be extended to other geographies.
What inputs do you expect from a strategic partner to build this network?
The partner in Iven Medicare will first bring in additional funds...and we are looking at a strategic fit from players who have done this before in overseas markets. What we are trying to do is build economies of scale; once a hospital group comes under the umbrella brand, we can bring in uniform processes in areas such as operations, recruitment, finance, as well as roll out an in-house insurance policy.
What parameters should a health care company satisfy for it to qualify for investment from Iven Medicare?
We are looking for regional players we can then include in a national roll-out. We want to build scale... For the patient, it will be a recognizable brand that offers a standardized service across all hospitals. In the back-end, the owner entrepreneurs have the opportunity to be a part of a growing business.
Rural health care and start-ups with an online health care model are also coming up in this sector. Will Iven Medicare invest in such offerings?
We have a significant corpus, and expect to invest across segments. We have an earlier investment in Metropolis Health Services, the largest pathology laboratory in the country. We will leverage that to build an umbrella brand across the country that will standardize pathology services.
There are other areas we are interested in, such as creating a national brand, such as a national network of old age homes, or even in specialized sectors such as teleradiology.