InvestorQ : Who is likely to emerge as the final bidder for Care Hospitals of Hyderabad, which has been on the radar of PE funds for a long time?
vidhya Laxmi made post

Who is likely to emerge as the final bidder for Care Hospitals of Hyderabad, which has been on the radar of PE funds for a long time?

sarah Leo answered.
3 weeks ago

There is a lot of PE action happening in the healthcare and pharma space in Hyderabad, which is gradually emerging as a preferred pharma capital for India. The latest pertains to the Hyderabad based hospital group, Care Hospitals. There are several companies in the reckoning for buying out Care Hospitals. Among the PE funds are KKR and Temasek. Then another competitor in the healthcare space, Max Healthcare, is also in the fray to buy out Care Hospitals and expand its footprint in the Southern region. Care Hospitals is expected to be valued at over $1 billion (about ₹8,300 crore).

There is an interesting development on the ownership of Care Hospitals over time. The company was established in 1997 by cardiologists Dr B. Soma Raju and Dr N. Krishna Reddy in Hyderabad and now runs 17 centres across 6 Indian states. Currently, it is fully owned by TPG Capital, one of the leading PE firms in the world. Incidentally, TPG had bought out Care Hospital stake from Abraaj Capital of the Middle East after the latter had gotten into regulatory problems and had decided to exit the stake in Care Hospitals. Since then, TPG is the majority owner of Care Hospitals.

For the FY22, Care Hospitals posted net sales of $211 million and EBITDA of $47 million so it translates into net margins of over 22%, which is extremely healthy. In addition, the revenues are expected to grow in the range of 15% to 30% annually, which is an extremely strong growth level for this sector. Both KKR and Temasek are already active in the Indian healthcare sector and this deal would only hasten the consolidation in the sector. These two PE firms are also strong contenders for Manipal Healthcare which is part of Ranjan Pai’s conglomerate of businesses ranging from education to healthcare.

The big trend to watch is whether this could trigger a consolidation of the healthcare properties in India. Here is why. It has seen strong interest from investors in the aftermath of the COVID pandemic. However, now things are back to more normalized growth. There have been deals aplenty. Ontario Teachers’ Pension Plan recently bought a majority stake in Pune-based Sahyadri chain of hospitals. We also had General Atlantic Partners (GAP) and Kedaara Capital buying out the 46% stake in ASG Eye Hospitals. For now, this could be the start of PE funds playing a more strategic role in Indian healthcare.