Private equity major KKR has entered exclusive talks to acquire a controlling stake in CVC Capital-owned cancer hospital chain HealthCare Global Enterprises Ltd (HCG), people aware of the matter told Moneycontrol.
CVC Capital acquired a controlling stake in the hospital chain in 2020 for Rs 1,049 crore.
“While several suitors had shown interest in acquiring the asset, KKR has emerged as the frontrunner to pick up the majority stake in HCG,” one of the people cited above said.
KKR has signed exclusivity agreements with CVC for the proposed stake sale, the person added.
CVC’s 60.36 percent stake is worth approximately Rs 3,613.97 crore, as per the stock’s closing price in the week gone by. A successful bid for CVC’s stake will trigger a mandatory open offer for 26 percent stake owned by public shareholders.
Hospital chain founders BS Ajaikumar and his family own a 10.87 percent stake in the chain.
The hospital chain went public in 2016, raising Rs 650 crore in its initial public offering (IPO).
KKR declined to comment on the matter, while an email sent to CVC Capital did not elicit a response.
HCG portfolio
HealthCare Global, headquartered in Bengaluru, is the largest provider of cancer care in India. It has a network of 22 cancer centres in India and Africa. HCG operates seven fertility centres under the Milann brand.
In the Jue quarter, the hospital chain’s revenue grew 14 percent to Rs 525.6 crore and profit 59 percent to Rs 12.1 crore.
HCG’s Ebitda for grew 21 percent to Rs 92.9 crore.
Earlier this month, HCG completed the acquisition of a 51 percent stake in Visakhapatnam-based Mahatma Gandhi Cancer Hospital & Research Institute for an enterprise value of Rs 414 crore.
KKR’s hospital deals
The Indian hospital sector has turned out to be a goldmine for KKR, with the private equity firm making a $2 billion exit Max Healthcare in 2022, five times the capital it invested in the hospital chain in 2018.
While KKR had been selling its Max stake on the market through small block deals, in August 2022, it sold its remaining 27.5 percent holding worth around Rs 9,200 crore in the biggest ever block deal on the Indian market at that time, highlighting strong investor interest in the country’s hospital sector.
A buzzing hospital sector
Following the covid outbreak, the Indian healthcare services sector has seen billions of dollars of investment from private equity firms as well as public markets.
The sector has seen several IPOs in the last three years, including from Dr Naresh Trehan’s led Medanta Hospitals (Global Health Limited) Rs 2,205 crore IPO in November 2022.
Several smaller hospital chains such as GPT Healthcare Limited, Jupiter Life Line Hospitals, Yatharth Hospital, Rainbow Children’s Medicare, too, have tapped the public market in the last few years.
The county’s largest eye-care chain, Dr Agarwal’s Health Care Limited, backed by TPG and Temasek, filed the draft papers for its IPO in September to raise around Rs 3,000-3,500 crore.
Blackstone, the world’s largest alternatives asset manager, acquired two hospital chains - Care Hospitals from TPG and KimsHealth - for over $1 billion in 2023.
Moneycontrol reported in September that Blackstone and TPG are planning to merge Care Hospitals with listed hospital chain Aster DM Healthcare.
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