New Delhi: Insurance and health-care firm Max India Ltd said it secured a Rs300 crore investment commitment from International Finance Corp. (IFC), the private investment arm of the World Bank, for its Max Healthcare unit. The company has raised another Rs1,000 crore from the market to fuel expansion of its insurance business.
Max, which is promoted by entrepreneur Analjit Singh, plans acquisitions in contract research as well as health insurance, while adding two hospitals a year to its network. The group plans to acquire contract research organizations in the US and Europe to bolster its existing operation, Neeman Medical International.
A Ficci-Ernst & Young study pegged the clinical trials market as rising to $1.27 billion (Rs5,207 crore) worldwide in 2012 with profit margins of 20-25%. “We are looking to buy two CROs in the US, for roughly $30-50 million. The deals should be finalized in the next couple of months,” said B. Anantharaman, joint managing director, Max India.
Anantharaman also provided details about his company’s Rs1,000 crore stock sale. The issue, of 41.7 million shares, constituting almost a fifth of Max India’s expanded equity, was oversubscribed 2.3 times at Rs240 per share.
Almost 80% of the shares were allotted to investors in the US and Europe, according to the issue’s global coordinator and sale manager CLSA Asia-Pacific Markets.
“Insurance is a long-term story and people do take a long-term view,” said Richard K. Taylor, head of equity capital markets at CLSA Equity Capital Markets Ltd New York Life Insurance Co. is Max India’s insurance partner in India. The fund infusion will lead to tripling of the insurance agents army to 75,000 and increasing the branch offices from 165 to 400 in two to three years.
To fund its plans in health care, the company said it gave a 3.4% stake in Max Healthcare to IFC for Rs50 crore at Rs55 a share, valuing the entire business, slated to tap capital markets through an initial public offering in 24-30 months, at about Rs1,470 crore. The other Rs250 crore from IFC will come through preferential capital. Warburg Pincus already has a 23% stake in Max Healthcare.
Max India will also be looking at allied businesses of insurance and health care, including health insurance and a chain of retail pharmacies, said Anantharaman.
Also on the drawing board are plans to build a 200-250 bed hospital as part of the revamped Delhi Airport though the plans haven’t firmed up, he added.
Max India said while health insurance is a good fit, management is still waiting for regulatory ambiguities to clear. “The top five global health insurance companies are sitting on the fence, awaiting clarity on regulatory issues from ministry of finance and insurance regulator. Until then, it will be tough to say who’ll enter and when as the entire feasibility of this business hinges on these issues,” said Shashwat Sharma, associate director with consultant, KPMG.
India’s insurance regulator is still to clearly frame guidelines on whether health insurance needs a separate license, what constitutes pre-exisitng diseases and if it is possible to halve the capital requirement in this business to Rs50 crore.
US-based Aetna Inc., Cigna Healthcare and British player Bupa Healthcare have all expressed interest in the domestic market their teams have done preliminary market surveys. “We have been in touch with these international players but there has been no agreement so far,” said Anantharaman.