Private equity fund True North (formerly India Value Fund Advisors) is close to buying a controlling stake in Kerala Institute of Medical Sciences (KIMS), a hospital chain operating in Kerala and West Asia, a person aware of the matter said.
Two others said True North became the sole contender after a consortium of global private equity funds TPG Capital L.P. and Temasek Holdings Pte. Ltd dropped out of talks. All three spoke on condition of anonymity.
According to the second of the three persons, the deal is likely to be closed at an enterprise value of $350 million (Rs2,380 crore), below the $400 million (Rs2,720 crore) that the private equity investors in KIMS had demanded.
Ascent Capital Pvt. Ltd and OrbiMed Advisors LLC, private equity (PE) investors in KIMS, will sell their combined 40% stake, while the promoters will dilute an additional stake, this person added.
IVFA is likely to join hands with one of its investors (limited partners) for the buyout and the discussions are on with investors such as Canada Pension Plan Investment Board and Abu Dhabi Investment Authority, Mint reported in October.
Out of 8-10 global funds which were in discussions with the existing investors, the TPG-Temasek consortium and True North were the front runners. Others which were interested in KIMS included US-based Blackstone Group L.P., and Baring Private Equity Asia, Mint reported in March. Existing investors OrbiMed and Ascent Capital acquired stakes in KIMS in early 2012. Ascent Capital and OrbiMed plan to exit their three-year-old investment, Mint reported first in September 2015.
In Kerala, KIMS runs a 650-bed hospital in Thiruvananthapuram and a 185-bed hospital in Kochi, the 600-bed KIMS Al Shifa in Perinthalmanna, and a 90-bed hospital in Kottayam, apart from several multi-specialty hospitals in Bahrain, Oman, Dubai, Saudi Arabia and Qatar.
Spokespersons for TPG Capital declined to comment. Mails sent to spokespersons at Temasek, Ascent Capital, OrbiMed, Dr M.I. Sahadulla, chairman and managing director of KIMS, went unanswered. An email and text messages sent to Vishal Nevatia, managing partner at True North, did not get a response.
A consortium of TPG Capital and Temasek was one among the two final contenders for acquiring Hyderabad-based CARE Hospitals, which was finally sold to Dubai-based private equity investor Abraaj Group in January.
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, according to a January 2015 PricewaterhouseCoopers’s report. This will require an investment of around $245 billion, it said. Foreseeing the demand, many PE funds are actively pursuing investment opportunities in the Indian healthcare space.
IVFA, which runs five India-focused funds with a combined corpus of over $1.8 billion, is an active investor in hospitals. It holds a minority stake in Manipal Hospitals with an investment worth $100 million made in 2012. IVFA owns a minority stake in Bengaluru-based Kids Clinic India Pvt. Ltd, which runs maternity and infant care hospitals under the brand Cloudnine, for Rs400 crore.
TPG Capital already owns a significant minority stake in Manipal Health Enterprises Pvt. Ltd, which the US fund acquired in February 2014 for Rs900 crore. TPG Growth, the growth investment fund of TPG, also owns Bengaluru-based Rhea Healthcare Pvt. Ltd, which operates a network of mother and child care centres in India under the Motherhood brand.