Mumbai/Hyderabad: India Value Fund Advisors (IVFA) is in talks to acquire a large minority stake in Cloudnine Hospitals, a Bangalore-based maternity and infant care chain, for 450 crore ($68-70 million), according to two people close to the development.

IVFA plans to acquire 35% in Cloudnine Hospitals in which Matrix Partners India and Sequoia Capital will sell their stakes partially, said the first person. Besides existing investors, the promoter of the firm will also sell about 10%, he added.

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

The details of stakes owned by Matrix and Sequoia are not available.

According to the second person, the Cloudnine stake sale will be done at an enterprise value of 1,350 crore. Started in 2007 by Dr Kishore Kumar, Cloudnine Hospitals is a joint venture of Kids Clinic India Pvt. Ltd and Scrips N Scrolls India, a property developer. Cloudnine currently has 16 hospitals, out of which 12 are in Bengaluru, and one hospital each in Chennai, Gurgaon, Pune and Mumbai.

Rohit M.A., managing director of Cloudnine, declined to comment on the stake sale.

“We will share the necessary formal information in due course," he said. Avnish Bajaj, co-founder and managing director of Matrix Partners India declined to comment. Mails sent to Vishal Nevatia, managing partner at IVFA and a spokesperson for Sequoia Capital on Wednesday did not elicit any responses.

The proposed fund will be used to expand its presence into more cities, the second person said.

In June, Mint had reported Cloudnine’s plans to open 12-15 more units. Cloudnine is looking to join hands or acquire small hospitals or start on their own in cities such as Coimbatore, Mysore, Mangalore, Indore, Surat, Nagpur and Noida, Mint reported.

“We evaluate opportunities in the context of population, growth metrics, demographics, industrialization and income levels, all of which ultimately leads into the pricing of the services," Kishore Kumar said.

Cloudnine expects revenue to reach 240 crore this fiscal from 150 crore in the previous year.

IVFA, which runs five India-focused funds with a combined corpus of over $1.8 billion, is an active investor in healthcare. In 2012, IVFA had invested $100 million in Manipal Hospitals and an additional 150 crore in medical equipment maker Trivitron Healthcare Pvt. Ltd in 2013. IVFA owns about 10% stake in Syngene International Ltd, a unit of Biocon Ltd.

Maternity and child care hospital chains are attractive investment destinations for private equity investors.

“The interest among PE investors on boutique mother and child care hospitals is that the capital requirements are relatively low, it’s easy to replicate and scale this model, specially in urban areas, where a lot of people now prefer a boutique birthing centre to a multi-specialty hospital," said Rana Mehta, leader of the healthcare practice at the consulting firm PricewaterhouseCoopers India.

In 2013, UK-based finance institution CDC Group and Dubai-based private equity investor Abraaj Group had jointly invested $17.5 million ( 107 crore) in Hyderabad-based Rainbow Hospitals, a child and maternity care chain.

The PE-backed chains that are active in mother and child care space include Acumen Fund-backed Lifespring Healthcare, Sabre Partners-backed Pune-based chain Oyster and Pearl Hospital and Peepul Capital-backed Bengaluru-based Motherhood Hospital.

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