Singapore's Temasek Holdings is set to acquire a controlling 72 per cent stake in Hyderabad-based CARE Hospitals from the current private equity owner Advent International for Rs 1,800 crore, edging past competing offers from Abraaj, an emerging markets private equity group.
Temasek had earlier teamed up with TPG Growth to form a consortium but the latter opted out of the race a few weeks back after it was not comfortable with the final contours of the transaction, including the pricing, said three people directly involved in the deal. Once completed, this will arguably be the first time that Temasek acquires a controlling stake in an Indian company on its own. It had earlier this year joined hands with Advent to buy the consumer division of Crompton Greaves.
A formal announcement is expected in the next seven to 10 days. "I would like to state that we have no comments to offer to your query," an Advent India spokesperson said in an emailed response to ET query. A Temasek spokesperson declined to comment on what he said were market speculation and rumours.
Founded in 1997 by Dr B Soma Raju and a team of cardiologists, Quality CARE India Ltd runs a network of 17 hospitals with 2,400 beds across nine locations under the CARE Hospitals brand name. The hospitals are based in Hyderabad, Secunderabad, Visakhapatnam, Raipur, Pune, Nagpur, Bhubaneswar, Jabalpur and Surat.
It is expected to add 600 more beds in the near future through greenfield and brownfield expansion taking the overall count to 3,000 beds. CARE also runs a network of telemedicine hubs in rural Andhra Pradesh and Maharashtra. Its founders developed Asia's first indigenous coronary stent.
In 2012, Advent acquired 72 per cent of the chain for $105 million (Rs 680 crore at current exchange rate) from investors including investor Rakesh Jhunjhunwala, Matrix Labs founder Nimmagadda Prasad and UK-based Ashmore. The remaining stake is held by doctors working at the chain.
Earlier this year, Advent mandated global independent investment bank Moelis & Co. and Capital Fortunes to sell its three-year-old investment. The process had seen wide interest in the initial round from financial and strategic partners, including consortiums such as PD Hinduja Hospital and Everstone Group as well as South African healthcare chain Netcare and Bain Capital. Singapore's Thomson Medical, China's Fosun Group, Malaysia's IHH Healthcare Bhd, private equity heavyweights Carlyle and domestic rivals like Manipal were also in the fray but dropped out in successive rounds.
Temasek — the Singapore government's investment company — revised its initial offer to match that of Abraaj, sources add. The doctors who plan to stay on and run operations are also believed to have preferred Temasek, a wellknown marquee investor in India. Even Thomson Medical had initially offered a higher price but its terms - a combination of stock and cash and milestonelinked-payouts - are believed to have met with a lukewarm response. Temasek has been actively investing in pharma and healthcare, having backed Gurgaon-based Medanta and cancer care specialist HealthCare Global Enterprises previously.
In India, bed availability was nine per 10,000 people in 2012, significantly lower than the World Health Organization guideline of 30 per 10,000. To meet this global standard, India will need to invest over Rs 14 lakh crore, Crisil said recently. The Indian healthcare market therefore has significant long-term growth potential, similar to other key regional markets, analysts said.
"We expect the Indian healthcare sector to grow to $350-380 billion by 2025 at a CAGR of 13-14 per cent," Barclays said in a September report. "In a highly fragmented healthcare market like India, where 90 per cent of the hospitals are in the unorganised segment (primarily regional non-pan Asia players), we believe prospects for inorganic growth are one of the highest across Asia."
In recent months, deal activity in the hospitals space has picked up with most PE-backed chains eyeing initial public offerings. They include Dr Devi Shetty's Narayana Hrudayalaya, Bengalurubased HealthCare Global Enterprises Ltd and Dubai-based cancer hospital chain Aster DM Healthcare.
In August, IHH Healthcare Bhd, which runs pan-Asian hospital chain Parkway Holdings, bought a 73.4 per cent stake in Hyderabad-based Global Hospitals for Rs 1,284 crore.