Hyderabad: India Value Fund Advisors (IVFA) has invested 400 crore for a minority stake in Bengaluru-based maternity and infant care chain Cloudnine Hospitals, joining existing investors Matrix Partners India and Sequoia India.

It would be the third round of fund-raising for Cloudnine. The company raised 100 crore ($16 million) in its second round led by Sequoia India and existing investor Matrix Partners India in 2013. Matrix had invested 45 crore in the company in 2011 as well.

The latest round of funding will give partial exit to Matrix Partners, Cloudnine said on Thursday.

Siddharth Dhondiyal, managing director of IVFA, and Sanjay Arte, partner at IVFA, have joined Cloudnine’s board.

The sale was done at an enterprise value of 1,400 crore, said Rohit M.A., managing director of Cloudnine.

IVFA was in talks with Cloudnine to acquire 35% stake, Mint reported on 11 December.

Cloudnine said it plans to use the money to set up 12-15 hospitals in western India, the national capital region and south India, in addition to investment in technology.

The company may also buy out existing maternity hospitals, Rohit said.

Started in 2007 by neonatologist Kishore Kumar, Cloudnine Hospitals is a joint venture of Kids Clinic India Pvt. Ltd and property developer Scrips N Scrolls India.

From a single hospital in south Bengaluru, Cloudnine has expanded its operations to 10 hospitals and five clinics across Bengaluru, Chennai, Gurgaon, Mumbai and Pune.

“The focus of the partnership and investment will be to further strengthen the core value proposition of the Cloudnine brand and extend the company’s leadership position in the women and child healthcare services segment as the company builds out a pan-India footprint," said Dhondiyal of IVFA.

Cloudnine is IVFA’s eighth investment in the Indian healthcare industry with prior investments in Care Hospitals, Biocon Ltd, TTK Healthcare Ltd, DM Healthcare, Manipal Hospitals, Trivitron Healthcare Pvt. Ltd and Syngene Ltd.

Maternity and child care hospital chains have become attractive investment destinations for private equity investors in recent years.

“These hospitals focus sharply on a single sub-specialty (maternity services), the clinical nature of which makes it possible to adopt an asset light and less capital intensive model that can be implemented faster, achieves better returns in a shorter time frame and can be rapidly scaled up," said Utkarsh Palnitkar, head of life sciences, KPMG India Pvt. Ltd, a consultancy firm.

“Further, while single specialty hospitals, including maternity care hospitals, have a clear value proposition, the customer value proposition is far more powerful in the context of maternity services," Palnitkar said.

With maternity care considered not a disease increasingly people are opting for boutique maternity and child care hospitals.

“Considering the above and the absolute magnitude of volumes for maternity care in our country, this segment is likely to remain attractive for some time; explaining the high levels of interest of private equity players as well as existing chains of multi-specialty hospitals like Apollo Hospitals (Cradle) and Fortis (La Femme) in this segment," Palnitkar said.

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