Investors such as TrueNorth, Creador and Everstone Capital have either started the process of exiting the hospital investment or started talks with buyers to sell their stake in these assets.
If the deals are successful, many hospitals could see a change in their shareholding structure over the course of the year.
For example, True North Partners is looking to exit Kerala-based KIMS Healthcare Management Ltd, where it had first invested in 2017. Investment bank ICICI Securities is running the transaction, two people familiar with the development requested anonymity.
Similarly, Creador is in talks to exit its investment in Delhi-based Paras Hospitals, and has appointed ICICI Securities to drive the transaction, the people mentioned above said.
Everstone Capital is in talks to exit Sahyadri Hospital, while investors in Faridabad-based Asian Institute of Medical Sciences (AIMS) may also exit, the people said. Everstone declined to comment, while Sahyadri Hospital did not respond to a request for comment. Mint reported last year that Everstone was preparing to move out of the Sahyadri hospital.
ICICI Securities declined to comment, while True North, Creator, Everstone, Paras Hospitals and AIMS did not offer comment on specific transactions.
“Covid waves have shown supply shortages in the region and the easing of Covid has stoked demand for many treatments that were put on hold. Companies are now gearing up for capacity building through the organic route or consolidation, and this is driving multiple hospital transactions,” said Satish Chander, partner at True North. “Quality companies that run well have value. Because they have met the demand-supply gap and have been a good investment for investors over the long term,” Chander said.
Several investors and investment bankers said potential hospital deals and others could net more than $2 billion to PE firms.
“The entire industry is consolidating and given the demand-supply gap, there is substantial investor interest for these transactions. Some properties are getting 16 to 17 term sheets from interested buyers (interest, tax, depreciation and amortization) multiplier, he said.
Some deals have already happened or are on the verge of completion. Last week, Temasek International and TPG Growth acquired ADV Partners’ stake in Dr. Agarwal Healthcare Ltd.
In March, news portal Moneycontrol reported that Bering Private Equity Asia was at the forefront of buying a stake in the Hyderabad-based Asian Institute of Gastroenterology. Furthermore, ASG Eye Care Hospital is on course for a new investor, with Investcorp and Foundation Holdings looking to exit, The Economic Times reported in March.
Gaurav Marathe, India CEO and managing director of global investment bank Lincoln International LLC, said hospitals were under stress during the pandemic as reflected in the performance of listed firms.
“A large number of hospital chains have grown at single digit CAGR (Compound Annual Growth Rate) in the last few years. Lower revenue growth and pressure on profitability pushed back any significant capacity addition by these hospitals, barring a few that are still under acquisition,” Marathe said, adding that the business landscape has changed in the last six months.
“With increasing demand from hospital businesses, the (investor’s) holding period well beyond 4 years appears to be a good time to start discussing liquidity options,” he said.
In addition, major hospitals such as KKR-backed Radiant and TPG-backed Manipal are driving the consolidation. In 2019, Radiant Life Care completed the acquisition of Max Healthcare. Manipal Hospitals had acquired Vikram Hospitals and Indian hospitals in Columbia Asia last year. Manipal is reportedly on the verge of a deal with Emami’s AMRI Hospitals.
PE firms have also created platforms to buy hospital assets over the past year. Samara Capital last year partnered with Godrej and Havells Family Office to build the hospital platform. Temasek Holdings-owned Sheers Healthcare is also acquiring assets. Ujjwal Singh, Director, Healthcare Investment Banking, Avendus Capital, said, “There has been a significant improvement in the profitability profile and return metrics of matured assets delivered by leading multi-specialty hospitals in the region, boosting the overall sector outlook.”