Race for Everstone-backed Sahyadri Hospitals

Top Canadian pension fund Ontario Teachers’ Pension Plan Board (OTPPB) may have edged ahead of other suitors to emerge as the lead contender to acquire private equity firm Everstone Group-controlled Sahyadri Hospitals.

On March 15, 2022, Moneycontrol was the first to report that Pune-based Sahyadri Hospitals, founded by leading neurosurgeon Dr Charudutt Apte and the largest hospital chain in Maharashtra, had been put on the block.

“Post the recent submission of binding bids as part of the ongoing sale process, OTPPB is seen as the favourite to clinch the deal,” said one of the persons cited above.

Four other persons familiar with ongoing negotiations confirmed the above, with one of them adding that OTPPB was the “likely winner” and may have submitted the most aggressive bid.

KKR-backed Max Hospitals and Luxembourg-based private equity firm CVC Capital Partners were earlier seen as other suitors in the fray for the proposed transaction.

In the March 15 report, Moneycontrol had indicated that the FY23 EBITDA (earnings before interest, taxes, depreciation, and amortization) expectations of Sahyadri Hospitals are in the region of Rs 175 crore and the valuation expectation is around 15 times EBITDA – implying a price tag upwards of Rs 2,600 crore. The report added that Singapore-based investment bank Rippledot Capital had been roped in as a sell-side advisor.

The first person cited above told Moneycontrol that during the binding bids round, the valuation was likely to be upwards of Rs 2,000 crore.

All the five persons cited above spoke to Moneycontrol on condition of anonymity.

When contacted, both Everstone Group and OTPPB declined to comment. Moneycontrol is awaiting a response from Sahyadri Hospitals.

In April 2019, Everstone announced the buyout of a majority stake in Sahyadri Hospitals via a combination of primary and secondary capital with an intention to position it as the anchor asset of the former’s healthcare delivery platform. The deal valuation though was undisclosed.

According to its Linkedin page, Sahyadri Hospitals currently has eight hospitals with 900 beds. It has more than 1,000 clinicians along with 2,300 supporting staff. The hospital chain provides services in the segments of Neurosciences, Haematology, Oncology and Oncosurgery, Cardiology and Cardiothoracic Surgery, Orthopaedics and Joint Replacements, Liver Transplant, General Surgery, IVF, Paediatrics, ENT, Ophthalmology, Nephrology, Urology and Tissue Engineering. On May 25, the Economic Times reported that OTPPB and Max Healthcare had entered the final lap of the deal.

OTPPB: The India portfolio
If the above transaction fructifies, it would be the first major bet in the India healthcare segment for OTPPB which has been majorly active in the domestic infra space.

In April, KKR and OTPPB announced the signing of agreements under which the pension plan board would invest up to US$175 million (CAD220 million) in KKR’s road platform in India, which includes Highway Concessions One.

For OTPPB, the transaction marked its third infrastructure investment in India, following its investment of a 25 percent stake in the National Highways Infra Trust late last year. OTPPB is also an anchor investor in the National Investment and Infrastructure Fund (NIIF).

The Everstone strategy
In an exclusive interview with Moneycontrol dated March 1, 2021, while responding to a query on sectors for fresh investments, Sameer Sain, the co-founder and CEO of Everstone Group said, “So, I would view healthcare/pharma, IT and business services and consumer as core to what we do. By the way, the reason is that those are structurally important and where we are long-term and even medium-term, very excited and very bullish when it comes to those three sectors.”

Sain added, “You know, being bullish is one thing, having the right pricing and deal flow is another. And then there are certain sub asset classes that you may not be so excited about, but we have a great healthcare asset at Sahyadri, that is in Pune, that is a high growth asset, that is a profitable asset. That is an absolutely amazing hospital chain with multiple locations and beds.”

In 2015, Everstone had sold its minority stake in Global Hospitals to Malaysia’s Parkway Hospital. The group’s existing pharma and healthcare portfolio in India includes healthcare platform Everlife which invests in manufacturers and distributors in the region covering key strategic segments including in-vitro diagnostics, medical diagnostics, critical care equipment, implants and consumables. Cardiac stent maker Translumina and Slayback Pharma, a maker of complex generic and speciality pharma products, are other portfolio companies in the segment.

Hospital M&A in the pink of health and cheer
The domestic hospital and healthcare space has been buzzing with deal activity as the economy gradually recovers from the impact of Covid-19.

Recently, Arpwood Capital announced the acquisition of the largest hospital chain in Gujarat, Sterling Hospitals.

On April 4, Moneycontrol reported that private equity investors were looking to exit north–focused super speciality hospital chain Asian Institute of Medical Sciences.

Earlier on March 15, Moneycontrol reported that the promoters of Manipal Hospitals were in talks to buy part stake from existing investor TPG ahead of an eventual IPO.

Moneycontrol also broke the news of Barings PE Asia emerging as the front-runner to pick up a significant minority stake in AIG Hospitals.

Back in January, Moneycontrol was also the first to report that TPG-backed Evercare was looking to exit Hyderabad-based Care Hospitals. Moneycontrol