Blackstone, Temasek, CVC eye stake buy in CARE Hospitals

As strategic private equity investor, TPG, plans to exit its stake in the Hyderabad based CARE hospitals, there are a string of potential and interested buyers lining up. While there is no official confirmation as of now, it is reported that several big private equity names like Blackstone, CVC Capital and Temasek are in the race to buy out the stake of TPG in CARE Hospitals. In addition, Max Healthcare, another major hospital and healthcare group in India, is also in the race to buy out the stake of TPG in CARE Hospitals.

 
CARE Hospitals stake is currently held by Evercare, a wholly owned subsidiary of TPG Growth. Incidentally, the interest among the private equity funds in this health property is not hard to fathom. For instance, CARE Hospitals is among the largest hospital chains in India and the buyer of this healthcare property gets ownership of 2,400 beds spread across 15 hospitals in India and another 2 hospitals in Bangladesh. Based on preliminary estimates, the valuation of CARE Hospitals is pegged at Rs7,500 crore or a tad less than $1 billion. 

Started in the Nampally facility in the city of Hyderabad, CARE Hospitals later acquired the Bhaskara Palace hotel property in the heart of the posh Banjara Hills area in Hyderabad and converted it into another major CARE Hospitals property. If the deal goes through in its current form, it would effectively be the second largest deal in the healthcare space. The biggest was the 2018 deal involving the IHH group of Malaysia buying out Fortis Healthcare, which was part of the Malvinder Singh and Shivinder Singh group of Ranbaxy Laboratories.

According to reports, the first round of bidding is done and dusted and the bids have already been received. At present, the bids were being reviewed by the advisors to the issue. It may be recollected that global investment banks; Rothschild and Barclays had been specifically appointed by TPG to advice on the sale process. In the last 25 years since its inception in 1997, CARE Hospitals has grown from a network of just 1 hospital to 15 hospitals in India and 2 in Bangladesh. Its number of beds have grown from 100 in 1997 to 2,400 in 2022.

CARE Hospitals has adopted a mix of organic and inorganic growth to expand its footprint in the healthcare space. It began as a cardiac hospital in 1997 and has now spread across multiple specialized disciplines. Its 2 hospitals in Dhaka in Bangladesh comprise of a total of 1,000 beds. Recently, CARE Hospitals had also added a total of 250 beds by acquiring Indore-based CHL Hospitals for Rs350 crore. Evercare (a unit of TPG) had acquired the stake in CARE Hospitals from the Abraaj Growth Markets Health Fund, based out of United Arab Emirates.

It is not hard to fathom why the likes of Temasek, CVC and Blackstone are interested in this healthcare property. There is a very strong macro story.

    • Between 2016 and 2021, the Indian healthcare industry has grown at a compounded annual growth rate (CAGR) of about 22% and it is likely to sustain this growth in the coming years too.

    • At this rate, if you were to peg the market potential in dollar terms, then the overall healthcare industry in India is pegged at $372 billion in 2022. The big opportunity is in taking this opportunity the organized sector route. 

    • In 2020, the Human Development Report had ranked India in 155th place globally in terms of bed availability. The ratio is so low that India currently has just 5 beds and 8.6 doctors per 10,000 people.
What these numbers mean is that the potential is humongous. India must add 3.6 million beds, 3 million doctors and 6 million nurses over the next 20 years and would entail an investment of $245 billion. Even if a small fraction materializes in the next five years, then sky is the limit for the organized healthcare industry.