Nearly three years after taking over the management of hospitals and clinics previously managed by a fund of failed private equity firm Abraaj, TPG-backed Evercare is planning to exit a key Indian asset from the portfolio, namely Hyderabad-based Care Hospitals, sources in the know told Moneycontrol.
“Investment banks Barclays and Rothschild have been recently mandated to carry out the proposed sale process of Care Hospitals via an auction process,” said one of the persons cited above.
A second person confirmed the appointment of advisors for the divestment of Care Hospitals and said “the deal is at a preliminary stage.”
He added that feelers were likely to be sent to both strategic suitors as well as private equity funds.
A third individual also confirmed the exit plans of TPG-backed Evercare.
“Healthcare demand is high, numbers have improved post two years of Covid-19 and valuations are high, so it’s a good time to exit. The target would fit in well for any player who wants to enter Hyderabad market or strengthen presence in the South,” the third individual said.
“All PE funds have an investment horizon. In any case, multiples are higher in India for the hospitals segment, which is a difficult business with a long gestation period for ROIs. Also, you need to scale up your business to make money,” added a fourth person on the sectoral environment.
All the four persons above spoke to Moneycontrol on the condition of anonymity.
In response to an email query from Moneycontrol, TPG and Barclays declined to comment. Moneycontrol is awaiting responses from Evercare, Care Hospitals and Rothschild and will update this article as soon as we hear from the firms.
TPG’s hospital portfolio in India also includes Ranjan Pai-led Manipal Hospitals and Motherhood Hospitals, one of the largest networks of women and children’s hospitals in the country.
The target and the history
Set up in 1997 by a team of cardiologists as a 100-bed cardiac institute, today, Care Hospitals is a multi-specialty healthcare provider with 12 hospitals spread in six cities across five states in India with over 2,000 beds, according to the Evercare website. It delivers care in over 30 clinical specialties such as Cardiac Sciences, Oncology, Neurosciences, Renal Sciences, Gastroenterology & Hepatology, Orthopaedics & Joint Replacement, ENT, Vascular Surgery, Emergency & Trauma, and Integrated Organ Transplants.
In January 2016, Abraaj had purchased 72 percent in Care Hospitals from Advent Capital for Rs 2,000 crore. Later, the Dubai-based fund collapsed following allegations of misappropriation and mismanagement of funds by its LPs (limited partners). In 2019, the reins were handed over to Evercare Group, which revamped the leadership and initiated a clean-up act.
Evercare is wholly owned by the Evercare Health Fund, a US $1bn emerging markets healthcare fund managed by TPG and backed by The Rise Fund. The emerging markets focused healthcare delivery platform operates across South East Asia and Africa, including Pakistan, Bangladesh, Kenya and Nigeria and has a portfolio of 31 hospitals, 18 clinics and more than 80 diagnostic centres.
In an interview to Reuters dated September 13, Evercare CEO Massimiliano Colella shared plans to expand the group’s presence in its five key markets by adding more clinics and diagnostic centres. The aim is to boost coverage to six million patients by 2025, from four million in Kenya, Nigeria, Pakistan, India and Bangladesh, he had said.
Deal rush in Indian hospitals space
The Indian hospital sector has seen a flurry of M&A activity over the past few years.
In November 2018, Malaysian Healthcare operator IHH acquired a controlling stake in Fortis Hospitals following a bitter bidding war. A month later, Radiant Life Care, promoted by Abhay Soi and backed by private equity firm KKR, announced plans to acquire via a merger, a majority stake in Max Healthcare, the hospital business of Analjit Singh-promoted Max India.
Recently, Max Healthcare Chairman and MD Abhay Soi told Bloomberg TV that the firm plans to invest $450 million over the next four years to add capacity in India. The firm has hospitals in the NCR region, North India and Mumbai.
Following unsuccessful bids for Fortis and Medanta Hospitals, Ranjan Pai-led Manipal Hospitals sealed back-to-back deals by acquiring Columbia Asia Hospitals for Rs 2,100 crores and Bengaluru-based Vikram Hospitals for Rs 350 crore. Singapore’s Temasek is also an investor in Manipal Hospitals. In April 2021, the firm received a Rs 2,100 cr fund infusion from NIIF (National Infrastructure Investment Fund) and according to reports, it is in talks to acquire Emami Group promoted AMRI Hospitals. Manipal Hospitals is planning an IPO over the next two-three years and in the interim phase, it has the option of bulking up the portfolio via the inorganic route.
Last year, Chennai-based Apollo Group underwent a restructuring exercise, as part of which Apollo Hospitals Enterprise Limited (AHEL) reorganised its business by slump sale of AHEL’s four businesses to form a 100 percent subsidiary Apollo HealthCo (AHL). The company stated that with this move, Apollo Group is creating India’s largest omni-channel healthcare platform.
In December, The Economic Times had reported that PE firm Quadria Capital backed AIG (Asian Institute of Gastroenterology) hospitals is up for sale.
A few other domestic strategic players include Azaad Moopen founded Aster DM Healthcare, Krishna Institute of Medical Sciences ( KIMS Hospitals), a healthcare group in AP and Telangana and Dr Devi Shetty founded Narayana Hrudayalaya. KIMS made a healthy debut on the domestic bourses in 2021 and is backed by private equity player General Atlantic.
Prior to the sale of Care Hospitals to Abraaj Group in Jan 2016, media reports had named four consortiums as interested parties for the deal, namely TPG Capital-Temasek, Hinduja Hospital- Everstone Capital, South African hospital chain Netcare and Bain Capital, and Baring Private Equity Asia and Malaysia’s IHH Healthcare. Moneycontrol