IDFC to sell Sahyadri Hospitals in deal valuing it at Rs1,000 crore
IDFC will sell its entire 51% stake, hires Chennai-based Veda Corporate Advisors to find potential investors
Mumbai: IDFC Alternatives Ltd, the asset management arm of Infrastructure Development Finance Co. Ltd (IDFC), is all set to sell Sahyadri Hospitals Ltd (SHL), the largest chain of multi-speciality hospitals in Maharashtra, according to two people with knowledge of the development.
The deal will value Sahyadri at about Rs.1,000 crore, said one of the people cited above, on condition of anonymity.
IDFC will sell its entire 51% stake, the person said, adding that it has hired Chennai-based Veda Corporate Advisors Pvt. Ltd to find potential investors.
The remaining 49% stake in SHL is held by promoters. The promoters include Dr Charudutt Apte, a neurosurgeon, Sadanand Bapat and Nitin Desai.
SHL has 11 hospitals with 1,300 beds and 2,300 supporting staff. The chain is present in Pune, Navi Mumbai, Nashik and Karad in Maharashtra.
“There is a chance that the promoters may also exit completely if they get the expected valuation,” said the second person cited earlier, also on condition of anonymity.
India Advantage Fund, run by ICICI Venture, sold its 40% stake in SHL to IDFC Alternatives in 2012. IDFC acquired another 11% from promoters, spending a total of Rs.190 crore for the 51% stake. ICICI Venture had acquired the SHL stake in 2008.
If the deal materializes at a valuation of Rs.1,000 crore, IDFC will get a 2.7 times return on its four-year-old investment, said the second person cited earlier. IDFC’s 51% stake will be valued at Rs.510 crore.
SHL reported a stand-alone revenue of Rs.226.25 crore in fiscal year 2014-15, as against a revenue of Rs.187.82 crore the previous year. In 2014-15, the chain reported a loss of Rs.25.9 crore, as against a loss of Rs.13 crore in the previous fiscal year. On a consolidated basis, the firm reported revenues of Rs.252.6 crore in 2014-15 and a loss of almost Rs.62.7 crore, according to data with the Registrar of Companies.
M.K. Sinha, managing partner and chief executive officer, IDFC Alternatives; Charudutt Apte, chairman and managing director, SHL; and a spokesperson at Veda Corporate Advisors declined to comment.
IDFC Alternatives manages over $3.4 billion in three distinct asset classes—private equity, infrastructure equity and real estate.
Through its private equity fund, IDFC Alternatives held stakes in medical firms such as HealthCare Global Enterprises Ltd, a Bengaluru-based oncology-focused hospital chain, and Manipal Health Systems Pvt. Ltd, promoted by the Manipal Education and Medical Group. It exited both investments in 2011 and 2010, respectively.
“A number of factors continue to attract private equity funds to the healthcare sector—low penetration levels, increasing insurance coverage, rising medical tourism, etc. Also, importantly, healthcare is one of the few sectors where private equity as an investor class has by and large made money, leading to greater confidence and alignment in putting further money to work,” said Mayank Rastogi, partner (transactions and private equity) at consulting firm EY.
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. This will require an investment of around $245 billion through traditional means, said PricewaterhouseCoopers’s January 2015 report, The Future of India: The Winning Leap.
According to the report, India has only 1.3 hospital beds per 1,000 people, which is significantly lower than the guideline of 3.5 beds, as defined by the World Health Organization.
The potential in the Indian healthcare system has prompted many investors to acquire significant stakes in hospital chains.
Last month, Dubai-based investor Abraaj Group acquired a majority stake in Hyderabad-based hospital chain Quality CARE India Ltd from global private equity firm Advent International for a deal worth Rs.1,700 crore.
Malaysian healthcare services major IHH Healthcare Bhd bought a 73.4% stake in Hyderabad-based Ravindranath GE Medical Associates Pvt. Ltd (Global Hospitals) for Rs.1,284 crore in August 2015.
India Value Fund Advisors (IVFA) invested Rs.400 crore for a minority stake in Bengaluru-based maternity and infant care chain Cloudnine Hospitals, in December last year.
Other large private equity deals in the hospital space in India include Carlyle’s 27% stake buy in Naresh Trehan’s Medanta Medicity in 2013. Singapore’s state-owned investment firm Temasek acquired about 18% in Medanta last year.
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