Berhad

US Private Equity Firm TPG Leading the Way for India’s Healthcare Market?

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February 10, 2015

Reports came in on Monday that Malaysia’s IHH Healthcare Berhad and US-based private equity firm TPG Capital Management are near to concluding talks for buying a controlling stake in India’s Global Hospitals. The deal could be worth $350 million and would mark private equity’s growing appetite for India’s healthcare sector.

 

Speculation About the Deal
Reuters broke the news on Monday citing sources close to the matter and it follows months after Global Hospital announced it is up for sale. At the time, it was unclear how big of a portion of the healthcare chain is up for sale, but sources now suggest a majority control is up for grabs.

 

According to Reuters’ report, the founder and current chairman, K. Ravindranath, and the private equity firm in control, Everstone Capital, are among the stakeholders looking to sell. The deal could be worth anything around $350 million, although none of the parties involved with the deal provided a public statement. One of the sources talking to Reuters said, “The talks are quite advanced. This would be a control transaction and could be finalised soon.”

 

Taking Control of the Lucrative Markets
If the deal were to go through as reported, it would mark a deeper hold for both firms on India’s growing healthcare sector. Asia’s largest hospital operator, IHH, already controls an 11% stake in Apollo Hospital Enterprises. The private hospital chain is India’s largest such business.

 

The private equity firm TPG has also invested in India’s healthcare in the past, although the current deal would be its largest such acquisition. The firm announced in January that it has bought a 25% stake in Manipal Health for $150 million.

 

Data by Grant Thornton shows 15% of all mergers and acquisitions in 2014 took place in the Pharma, healthcare, biotech sector with private equity involvement in the sector also increasing. Global Hospitals has a steady market position in India. It currently has five larger hospitals and three smaller units in operation in Mumbai, Chennai, Bangalore and Hyderabad.

 

A Recession Proof Sector
Much of the appetite towards the sector is driven by the economic growth in the country and the rise of the middle class. Affluent Indian patients are more able and indeed willing to pay for private clinics for high-quality care, especially as the public, state provided care is lacking behind. India’s public spending is one of the lowest in the world, which analysts see as a lucrative selling point for investors. Deven Choksey, managing director of KR Choksey Securities, even told Reuters the healthcare sector is “recession proof”.

 

Even though private equity investments were slightly slower last year at $552 million, the previous years have seen a steady growth, which is expected to continue this year. PE investments have increased from 29 in 2011, 45 in 2012 and 71 in 2013. Last year’s dip could be explained by the elections in India. But president Modi’s push for more foreign investment could help lure in more private equity this year.

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