Omni Hospitals acquires two properties
OMNI Hospitals acquires stake in UDAI Clinic in Hyderabad, management rights for hospital in Kurnool
New Delhi: Hyderabad-based OMNI Hospitals, part of the privately-held diversified firm INCOR Infrastructure, has added two hospitals to its network through the O&M (operation and management) and acquisition route, a top executive of the company said.
“Earlier we had acquired 51% stake in Hyderabad-based UDAI Clinic, which we have now rebranded as UDAI OMNI Hospital. It is a 30-bed hospital; we will add 100 beds more,” said Surya Pulagam, founder and managing director of OMNI Hospitals.
UDAI Clinic was acquired earlier this year.
According to Pulagam, the acquisition and investment in the hospital will cost the company around Rs.50 crore. The hospital beds will be expanded in the next one year.
The company has also signed an O&M contract for a hospital in Kurnool in Andhra Pradesh, acquiring the management rights to this 120-bed hospital for 20 years.
“It is a structured deal where we are investing Rs.15-20 crore for both taking over management rights of the property and to upgrade this hospital,” Pulagam added.
The two acquisitions give the company five hospitals with 450 operational beds, two in Andhra Pradesh and three in recently created Telangana. The second acquisition was done in the first week of this month.
OMNI Hospitals has been on an expansion drive primarily through the inorganic route, looking at mixed deals where part of the investment goes into acquiring a stake in the hospital while the rest is invested in upgrading facilities and increasing bed capacity.
“Acquiring operation and management rights is a good asset-light strategy for expansion and of lat, we have been seeing a lot of larger players also moving in this direction. We have been seeing this a lot more in Tier-II and Tier-III cities. Some of these targets are trust-based hospitals which are facing a challenge with operational efficiency. Some do not have the capital to upgrade their technology and facilities. The O&M partner brings the capital to upgrade the facilities and improves the quality of healthcare services,” said Rana Mehta, leader-healthcare at PWC India, a management consulting company .
OMNI Hospitals has a pipeline of two to three more acquisitions which it will explore next year, Pulagam said. The company will also look at raising a second round of funding of around Rs.100-150 crore during that time, he added.
In 2013, the company raised Rs.60 crore from ASK Pravi, a joint venture between ASK Group and Pravi Capital. The private equity fund was started by former ICICI Venture executives Jayanta Banerjee, Anand Vyas and Sunay Mathure. The fund recently made a second close of its debut fund at Rs.300 crore ($50 million) which it raised from domestic investors, including high net worth individuals (HNIs) and family offices.
With recent infusions of private equity capital in healthcare, a number of regional hospital chains have been expanding inorganically, seeking to increase their reach and become dominant players in those markets. They include Vijayawada-based Ramesh Hospitals which raised capital from Piramal Group’s India Venture Trust in 2013, Kolkata-headquartered Medica Synergie which raised around Rs.250 crore from a consortium led by Asian healthcare-focused private equity firm Quadria Capital, Hyderabad-headquartered CARE Hospitals which raised $105 million from Advent Interactional in 2012, and Punjab-based hospital chain Ivy Health which raised Rs.70 crore from German development fund DEG in 2013.
“Most of the regional players have a good understanding of their markets and with the infusion of private equity money, these players have adequate capital for acquisitions and capital expenditure in facilities. In the next few years, there will be a consolidation play where these players will be attractive targets for acquisition,” Mehta said.
Editor's Picks »
- Motherson Sumi continues to face margin pressure in foreign markets
- What the Warren Buffett indicator tells us about market valuations today
- Jet Airways lands with a thud in Q4 as fuel costs increase
- IBC amendments: Some dilutions, and a lot more speed
- Patanjali’s gambit is paying off in toothpaste wars