Race for Sahyadri Hospitals: Temasek-led Manipal Hospitals, IHH, EQT & KKR seen as early contenders

Singapore investment giant Temasek and billionaire Dr Ranjai Pai-led Manipal Hospitals, Malaysia's IHH Healthcare, Swedish private equity major EQT and US private equity firm KKR are among suitors that have expressed preliminary interest in a potential acquisition of Sahyadri Hospitals, multiple industry sources in the know told Moneycontrol on the condition of anonymity.

The Pune-headquartered asset is the largest private multi-speciality hospital chain in Maharashtra and is owned by top Canadian pension fund Ontario Teachers Pension Plan Board (OTPP).

On January 23, Moneycontrol had reported that OTPP had engaged investment bank Jefferies for the proposed sale process.

"Early-stage discussions in the form of inbound enquiries have taken place and private equity and strategic suitors are evaluating the opportunity, though any formal bid submission is still some time away. Over the course of the next few weeks, the teasers for the deal will be sent out along with the non-disclosure agreements, followed by the information memorandums ," said one of the persons above.

A second person added that Alvarez and Marsal has also been roped in as an advisor by OTPP for the proposed transaction.

According to a third person, "Currently, if a buyer wants to take control of a multi-speciality hospital chain in India, Sahyadri Hospitals is probably the only sizeable target available with scale and it's doing well. Other deals may be minority situations."

Moneycontrol has sent email queries and is awaiting a response from OTPP, Sahyadri Hospitals, Alvarez and Marsal, IHH Healthcare and Fortis Healthcare. IHH Healthcare has responded with a statement that said it does not comment on market speculation and will update if there are any material development, without offering further comment. This article will be updated as soon as we hear from others.

When contacted, Temasek said it "does not comment on behalf of its portfolio companies". An email query to Manipal Group chairman Dr Ranjan Pai remained unanswered.  This article will be updated as soon as we hear from them. Both KKR and EQT declined to comment.

As per the January 23 report by Moneycontrol, OTPP owns nearly 100 per cent of the firm and since coming on board, has ramped up in several specialities like mother and childcare and oncology.

"The asset has more than 1,200 beds across Pune, Ahmednagar (now Ahilyanagar) and Nasik with further expansion plans in the state and will be attractive to those players not present in Maharashtra or western India. Sahyadri Hospitals is expected to clock around Rs 240 crore in Ebidta for FY25 and the sale will be a valuation discovery process," the report had added.

As part of its first control private equity buyout in India, on August 16, 2022, OTPP had announced an agreement to acquire a significant majority stake in Sahyadri Hospitals Group from the Everstone Group with reports pegging the valuation of the hospital chain at around Rs 2,500 crore.

Sahyadri Hospitals was established in the year 1994 with Pune Institute of Neurology exclusively dedicated to Neurology and Neurosurgery. Dr. Charudutt Apte, Sadanand Bapat and Nitin Desai are the founders and according to its website, the chain has 11 hospitals across Maharashtra, more than 50 lab collection centres, 2,000 plus clinicians and over 4,000 expert staff.

Who will check into Sahyadri Hospitals? A look at the aspirants

South-focused and Temasek-backed Manipal Hospitals, an IPO- bound firm, has grown inorganically via deals like Vikram Hospitals and Columbia Asia's Indian operations and has expressed interest earlier in the sale process of hospital chains like KIMS Healthcare (which was acquired by Blackstone). At one stage, Delhi-headquartered Max Healthcare was also eyeing the Kerala-based asset.

In fact, in a separate M&A process involving Care Hospitals, which was owned by TPG backed Evercare Group, Max Healthcare had taken legal recourse over the sale to Blackstone. Later, the parties reached a settlement.

In September, Prem Kumar Nair, Group CEO of IHH Healthcare said the firm intends to stay and grow in India with Fortis and Gleaneagles, the "twin growth engines."

"If we do some acquisitions along the way, we will add another 1,000 or 2,000 and that's why I said between the two ( Fortis + Gleneagles), we'll probably have about 10,000 beds in a few years' time," Nair said in interview to CNBC-TV18 in September.

Nair added, "For a strategic acquisition or a big acquisition to take place, we have got several criteria. First, it must be in a market or in an area. Of course, there must be significant demand, and we look at the competitive situation. We want to get facilities that have the highest clinical quality. Secondly, we put a lot of emphasis on patient outcomes. Thirdly of course, it must be accretive within 2-3 years."

Last month, KKR announced that it has agreed to acquire a controlling stake in top cancer treatment chain HealthCare Global Enterprises Ltd (HCG) from CVC Partners for around $400 million. That's not all. In August, the investment firm also sealed the buyout of a controlling stake in Kerala based Baby Memorial Hospitals. KKR, was earlier an investor in Max Healthcare and exited later via mega block deals.

EQT has invested more than $6 billion in India over the last 21 months and in December, Jean Salata, Chairperson EQT Asia and Head of Private Capital Asia said that the buyout market is "underpenetrated" in India and EQT seeks to replicate the success achieved by the firm earlier in the IT services segment with similar, control deals in the healthcare and financial services segment.

Recently, the private equity major, which has no presence in the hospitals segment, filed confidential draft papers for the IPO of portfolio firm Indira IVF.

In November, the world's largest private equity player Blackstone struck India's biggest healthcare deal by sealing a merger of its portfolio firm Quality Care India Ltd with Moopen family-founded Aster DM Healthcare, creating a combined entity valued at around $5 billion.

OTPP is betting big on India to achieve its target of hitting $300 billion in net assets by 2030. "We have more than $3 billion invested in India, and it’s one of the key strategic countries we are focused on as part of our strategy to reach $300 billion in net assets by 2030," the firm's 2022 annual report said.