Zavata will boost Apollo’s presence in health-care BPO biz

Zavata will boost Apollo’s presence in health-care BPO biz

New Delhi: In the largest overseas acquisition by an Indian healthcare company, Apollo Health Street (AHS) bought US-based business process outsourcing unit Zavata Inc. for $170 million (about Rs700 crore).

The acquisition will add muscle to Apollo’s presence in this high-margin business segment, especially in the US, where hospitals spend significantly money on health-care software solutions.

“A company can get clients and projects in the US, do the work out of India (Hyderabad, in Apollo’s case) and gain a lot from cost competitiveness," says consulting firm Technopak’s Abhishek Pratap Singh.

The combined entity, with operations in the US, India, England, South Africa and West Asia, and will have 160 clients and 2,500 employees in the US and India.

Apollo Health president Andrew DeVoe said the company expects to close the year with revenues of about Rs400 crore.

“There are significant synergies here, with acquisition of Zavata helping Apollo Health Street to become one of the largest, integrated health-care BPOs," says Sangita Reddy, managing director of Apollo Health. Reddy estimates savings of $1-2 million this fiscal year, and about $5-7 million in the next two to three years. Zavata will add a complementary set of services, such as business office and emergency medical transport billing.

Shares of Apollo Hospitals Enterprise Ltd, which owns 47% of AHS, fell 1.70% to close at Rs481.50 on the Bombay Stock Exchange even as the benchmark Sensex rose 0.86%.

The acquisition was funded through debt of $140 million raised from Bank of India and Barclays Bank, and equity of $50 million. Apollo Health paid 10 times the Ebitda (or earnings before interest, taxes, depreciation and amortization) of Zavata.

While Apollo Hospitals’ equity contribution is $25 million, the investment and stakes picked up by One Equity Partners, an investment arm of JP Morgan Chase & Co., and Singapore-based Temasek Holdings have not been disclosed. All these companies hold stakes in Apollo Health as well.

Technopak’s Singh noted that Indian hospitals and those in the US were at different phases in their investment strategy. The Indian players seek health-care consultancy for business strategy, facility design, planning and, only then, turn to health-care information technology. Most US hospitals, meanwhile, are now spending on redesigning information technology systems.

According to Apollo Health, $30 billion is currently spent on claims processing, medical management, call centre and related services and another $48 billion on revenue cycle management, medical coding and medical transcription.

Zavata is the fourth acquisition by Apollo Health and its second in the US.

Jeetha D’Silva in Mumbai contributed to this story.