The Business Of Hospitals: Big-ticket deals dominate PE/VC investment flows

The Indian Express
April 02, 2018
Pranav Mukul

Data sourced from Chennai-based research firm Venture Intelligence shows that a total $3.4 billion has been injected into hospitals by PE investors from 2007 till 2017.

The deal between Fortis Healthcare and Manipal Health Enterprises — which is backed by private equity (PE) investor TPG Capital — may well be valued at over $2 billion making it the biggest investment in a hospitals chain involving a PE firm.

Data sourced from Chennai-based research firm Venture Intelligence shows that a total $3.4 billion has been injected into hospitals by PE investors from 2007 till 2017. Notably, almost half of the investment during the period came via 10 transactions. Prior to the Fortis deal, the largest one was in early 2016, when Dubai-headquartered Abraaj Group bought controlling stake in Hyderabad-based CARE Hospitals for around $221 million.

International Finance Corporation (IFC) has been the most active investor with 10 deals in various chains such as Fortis Healthcare, Max Healthcare Institute, Apollo Hospitals. India Value Fund (now known as True North), ICICI Venture, Milestone Religare Investment Advisors and Seedfund were some of the active ones. Key investments made were in firms such as Manipal Health, Aster DM Healthcare, CARE Hospitals, Jeevanti Healthcare, Vikram Hospital & Heart Care and Vaatsalya Healthcare in their portfolios.

In two deals in 2015 and 2017, Manipal Health raised $321 million from TPG Capital and Temasek Holdings, respectively. Naresh Trehan-led Medanta Medicity, in two deals in 2013 and 2015, received $275 million from Carlyle Group and Temasek, respectively.

Barring a few, the investments by PE players have gone into hospitals boasting multi-speciality facilities.

Investments, albeit relatively smaller, have been made by funds such as IFC, TPG Growth, India Value Fund, Sequoia Capital, Matrix Partners India, Nexus Venture Partners, among others, into clinics and super-speciality hospitals.

The flurry in investments mainly from overseas funds started after 2000, when India allowed 100 per cent FDI in the hospitals sector.

In addition, while several domestic hospitals such as Max Health Care Institute, SevenHills Hospital, Narayana Hrudalaya, Kanishka Healthcare have received FDI from other investors, there are firms being invested in by other hospitals as well. Malaysia-based IHH Healthcare Bhd has invested in two Hyderabad-based firms — Global Hospitals and Continental Hospitals.

Reportedly, IHH, which earlier had plans to acquire stake in Fortis Healthcare, was again in the fray before Fortis announced the deal with Manipal Health. Interestingly, there are some hospitals in India that are also being operated completely by foreign firms. These include Bengaluru-based Sakra World Hospital, which is run by Japanese firms Secom Medical Systems and Toyota Tsusho Corporation; and Columbia Asia Hospital, which runs 12 centres in India, is headquartered in Malaysia.

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