Abraaj follows West Asia peers in chasing Indian assets

Buys controlling stake in Hyderabad's Care Hospitals in the largest inbound controlled transaction by a West Asian fund

The Abraaj Group, a Dubai-based private equity fund, has acquired 72 per cent stake in Hyderabad’s Care Hospitals in a deal that is marked as the largest inbound control-transaction by a West Asia fund. Abraaj acquired the stake from US-based PE firm Advent International in a deal that valued the fifth largest Indian health care provider at Rs 1,800 crore.

West Asia-based funds have got aggressive in India shifting their focus from European markets to emerging ones, where returns are better.

Last month, Kuwait Investment Authority invested $300 million in debt-laden GMR Infrastructure by subscribing to foreign currency convertible bonds. Also, Abu Dhabi Investment Council made two large investments last year — $300 million in Altico Capital, a non-banking financial company that lends to realty players, and $265 million in ReNew Power.

DEAL DYNAMICS

• Care Hospitals valued at Rs 1,800 cr
• Abraaj buys 72% from Advent International
• Advent makes 2.2 times return in 3 years
• Abraaj buys additional stake from promoters

“A whole new corridor of investments into India is emerging from West Asia, de-risking us away from the volatile European and US investors,” says Manisha Girotra, chief executive officer, Moelis & Company India, which advised Advent International for the deal in which the PE firm made 2.2 times return on investment.

Founded in 1997 by B Soma Raju, Care operates 2,600 beds across 16 hospitals in nine cities. It is recognised for its focus on cardiac care and neurosciences. Abraaj and Care’s management team will focus on expanding in the under-penetrated regions of India and other markets where Abraaj operates.

“The implications of the healthcare gap in India are profound, but they translate into a long-term opportunity for Abraaj to help build a better and more sustainable healthcare infrastructure in the country,” said Sev Vettivetpillai, partner and global head of Abraaj’s thematic funds business. The Abraaj Group has a strong track record of investing in healthcare, having deployed nearly $1 billion globally in 27 investments across the healthcare spectrum in growth markets.

“We are confident that Abraaj with its track record, healthcare expertise and strong relationships with leading strategic partners and development finance institutions, will enhance our service offerings. These relationships will play a key role in enhancing public-private partnerships that are essential to the development of sustainable healthcare systems in India,” says Soma Raju. The transaction is subject to customary closing conditions and is expected to conclude in the first quarter of 2016.

Year 2015 saw investments worth $1.09 billion by funds from West Asia, second highest after the record $1.5 billion fund flow in 2013. Most of these were from sovereign wealth funds or family offices.

“A number of them are looking at core sectors for investment in India (specifically real estate and infrastructure) where they are taking longer term bets,” said Sanjeev Krishan, partner and leader, private equity & transaction services, at PricewaterhouseCoopers India.

“A  number of them stayed away from India in the past, and focused on the MENA (Middle East and North Africa regions) and are using the depressed valuations and their ability to hold on to investments longer as key reasons for their India focus,” said Krishan.