Three US funds—KKR and Co. Lp, TPG Capital and Bain Capital—and strategic buyer IHH Healthcare Bhd are already in talks to buy the stake from the Singh brothers—Shivinder Singh and Malvinder Singh. IHH Healthcare, Asia’s largest healthcare group, operates the Parkway Pantai hospitals.
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A deal could value Fortis, India’s second-largest hospital operator, at around $1.6 billion (Rs10,600 crore) or Rs200-210 a share, said one of the two people cited above, both of whom spoke on condition of anonymity. The Singh brothers are in the process of selling various businesses to reduce the group’s debt, which stood at Rs4,700 crore as of 31 March 2016, up from Rs3,831 crore in June 2015.
Fortis operates 45 hospitals (including projects under development) in India, the United Arab Emirates, Mauritius and Sri Lanka. The Singh brothers control Fortis Healthcare Holdings Pvt. Ltd (FHHPL), which owns a 52.2% stake in Fortis Healthcare as of end-March.
KKR is in talks with the Singh brothers to acquire a controlling stake in Fortis, Mint reported in January. Mint had also reported that Bain Capital was interested in acquiring the Fortis stake.
Spokespersons for Fortis Healthcare and General Atlantic declined to comment.
General Atlantic, which has invested about $2 billion in India since 2002, including companies such as BillDesk and IIFL Wealth Management Ltd, is interested in healthcare as well. It is also in discussions with private equity investors to acquire their 69% stake in MedPlus Health Services Pvt. Ltd, the second-largest pharmacy retail chain in India.
General Atlantic had previously shown interest in acquiring a 10-15% stake in Dubai-based Aster DM Healthcare, a hospital chain owned by NRI doctor-businessman Azad Moopen, Mint reported last May. The deal did not materialize.
“Healthcare had been a key sector for private equity funds over the last three to four years. A number of hospital chains have seen multiple rounds of funding already - as these assets mature, there would be interest from corporate buyers as well as consolidation opportunities for the investors," said Sanjeev Krishan, transaction services and private equity leader at advisory firm PwC India.
Parkway Pantai, which operates in Singapore, Malaysia, China, Brunei and the United Arab Emirates, has a strong presence in India. It entered India in 2015, buying 51% in Hyderabad-based Continental Hospitals for Rs300 crore and 74% in Global Hospitals, also based in Hyderabad, for Rs1,280 crore.
“IHH is always looking at various value-accretive opportunities. However, it is not appropriate for us to comment on specific transactions and we will update the market if there are any material developments," said IHH spokesperson.
However, it is not clear if a deal will be concluded soon, as Japanese drug maker Daiichi Sankyo Co. Ltd has opposed the sale. Daiichi, which claims the Singh brothers had suppressed information while selling Ranbaxy Ltd to them in a $4.6 billion deal in 2008, approached the Delhi high court seeking its intervention and blocking the Fortis sale.
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Last month, the court asked the Singh brothers to seek its approval before selling a stake in Fortis Healthcare. Daiichi had said in court that the brothers were looking to get an investor in Fortis Healthcare and that the sale would dilute assets and hamper the recovery of damages from them.
The Delhi high court case relates to enforcement of an arbitral award in proceedings initiated by Daiichi against the Singhs in relation to its 2008 purchase of a majority stake in Ranbaxy, then owned by the brothers.
A Singapore tribunal had ordered the brothers to pay a sum of Rs2,562 crore to Daiichi Sankyo as damages. The Singh brothers are contesting this in the Delhi high court.
Early this month, the Singh brothers’ financial services firm Religare Enterprises Ltd sold its health insurance arm, Religare Health Insurance Co. Ltd, to a consortium of investors led by private equity firm True North Managers Llp.
Singh brothers-owned SRL Diagnostics, the country’s largest diagnostic chain, has also been up for sale, as private equity investors are keen to cash out. Buyout funds such as KKR, Warburg Pincus Llc and Baring Private Equity Asia have shown interest in buying the 34% stake held by existing investors, Mint had reported in January last year.
These investors include International Finance Corp. (IFC), NYLIM Jacob Ballas and Avigo Capital Partners. Fortis Healthcare Ltd holds a stake of about 57% in SRL Diagnostics, while the promoters hold the remaining equity.