INDIA —Blackstone, the world’s largest private equity group, is the one contender left within the race to acquire Care Hospitals for 7,800-8,000 crore (US$947.5 – 971.7 million) in what can be one of many largest healthcare buyouts within the nation.

Blackstone’s provide trumps a competing bid from Temasek’s Singapore-based hospitals platform, Sheares Healthcare.

The two had made the ultimate shortlist, however, Sheares ultimately opted out, Economic Times reports.

The 2,400-bed hospital chain is owned by a TPG Growth platform, Evercare. Investment banks Rothschild and Barclays are advising TPG on the sales process.

On November 7, the Economic Times was the first media outlet to report about Blackstone and Sheares rising as frontrunners in a keenly contested bidding course that had additionally drawn CVC, Ahmedabad-based Torrent Group, and Carlyle, amongst others.

As the sole bidder, Blackstone has now raised some considerations throughout its diligence over Care’s Bangladesh property. Most see this move as Blackstone’s strategy to negotiate a better value for itself.

 “This is classic negotiation. It is not that Blackstone did not know about the footprint but now that it’s the only contender, it would love to bring the price down,” stated an individual concerned within the negotiations, on the situation of anonymity.

The question is to what extent the seller will budge. Such considerations always have commercial

1st hospital deal

This would be the first hospital deal for Blackstone, which has been scouting for healthcare property for some time now.

Once completed, this might be the second-largest hospital buyout in India after the IHH-Fortis transaction in 2018. This transaction will even give a presence within the South Asia healthcare market for Blackstone.

Blackstone Inc. has amassed US$11 billion to purchase firms in Asia after elevating its second private-equity fund for the area, almost tripling its earlier pool of capital raised in 2018.

Among the biggest hospital chains in India, Care has 15 hospitals within the nation and two in Bangladesh.

Care Hospitals is predicted to submit income of US$340 million in FY23 with an Ebitda of US$75 million, towards US$211 million income and US$47 million Ebitda in FY22.

Revenue is predicted to expand by 15-29% this financial year.

Started in 1997 as a 100-bed cardiac hospital in Hyderabad by cardiologists Dr. B Soma Raju et al., Care has expanded right into a community of 17 healthcare services in six states with greater than 2,400 beds providing 30 medical specialties in India and Bangladesh. It has two hospitals in Dhaka with 1,000 beds.

Care added 250 beds in July through the acquisition of Indore-based CHL Hospitals. In the same month, it gained a ‘significant majority’ stake in Aurangabad-based United Ciigma Hospital, its third such deal since April, to consolidate and deepen its presence in fast-growing tier-2 markets.

In 2018, TPG Growth-backed Evercare acquired the healthcare portfolio of UAE’s Abraaj Growth Markets Health Fund, which owned a majority stake in Care Hospitals.

Dubai-based Abraaj collapsed following allegations of mismanagement of its US$1 billion healthcare fund.

Abraaj bought 72% of Care Hospitals from Advent Capital for Rs 2,000 crore (US$243 million in current conversion rate) in January 2016.

Multiple change of hands

Over the years, equity infusion by the private equity players had led to the founder promoters’ holding turning into zero by April 2019.

Subsequently in November 2019, the ex-founder group of cardiologists (40 doctors in total) determined to separate methods, and consequent to this choice, Dr. B Somaraju and a workforce of 10 different doctors exited the corporate.

The new cardiology workforce introduced by the group has ramped up nicely and that has benefited performance in this specialty.

Blackstone, which has interest in pharma & healthcare sector in India, was also a frontrunner to acquire the wholly-owned injectables arm of Aurobindo Pharma, valuing the enterprise at round Rs 26,000-30,000 crore (US$3.4 —4 billion).

However, the deal was called off because of a valuation mismatch. It is now competing with Advent for Suven Life Sciences.

Globally, Blackstone owns GroupHealth, a medical staffing agency, which was acquired in 2016 for US$6.1 billion.

TPG is also selling its 20% stake in Ranjan Pai-led Manipal Hospitals and is in talks with PE fund KKR. The PE group additionally has a controlling stake in Motherhood Hospitals, a community women and children’s hospitals in India.

India’s healthcare sector has seen big interest from global private equity funds. KKR, which acquired a majority stake in Max Healthcare together with Mumbai-based Radiant Life Care in 2018, made a full exit in August with a 5X return.

US-based Carlyle Group owns about 27% stake in Medanta Medicity Hospital, which was partly bought within the not-too-long-ago launched IPO.

Recently, Ontario Teachers’ Pension Plan Board (OTPP) acquired a big majority stake within the Sahyadri Hospitals Group at a valuation of Rs 2,500 crore (US$ 303.7 million) and Baring PE Asia acquired a minority stake in Hyderabad-based AIG Hospitals.

India’s healthcare business has been increasing at a compounded annual growth rate (CAGR) of about 22% since 2016.

At this rate, it’s anticipated to reach US$372 billion in 2022, stated a 2021 Niti Ayog report. India has enormous potential for funding within the under-penetrated hospitals sector, consultants say.

A 2020 Human Development Report confirmed that India ranked one hundred and fifty-fifth in bed availability with 5 beds and 8.6 doctors per 10,000 people.

The hospital business would require funding of around US$245 billion over the subsequent 20 years, in line with the latest PwC report.

India needs to add 3.6 million beds, 3 million doctors, and 6 million nurses over the subsequent 20 years, it added.

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