Actis sells Sterling Hospitals back to Patels

Move comes after many attempts by PE firm to find other buyers for the chain; deal reportedly over Rs 400 cr

Actis, the UK-based private equity major, trying hard for long to exit its controlling stake in Ahmedabad-based Sterling Hospitals, has decided to sell the equity back to the original promoters, Girish Patel and his family.

The latter were promoters of Paras Pharma, which created strong  brands such as Moov, D'Cold and Livon. Financial details of the deal have not been disclosed.

When asked, Girish Patel confirmed the deal but refused to disclose the details, citing a non-disclosure agreement. Patel now plans to aggressively expand Sterling beyond Gujarat, to neighbouring Rajasthan, Maharashtra and Madhya Pradesh. Sterling currently runs seven hospitals -- at Ahmedabad, Vadodara, Rajkot, Bhavnagar and Mehsana, beside smaller units at the Mundra economic zone and Adipur, both at Kutch.

STERLING’S JOURNEY

• 2006: Actis invested $15.5 mn (Rs 69 cr) for 41% in Addlife Medical Institute, which owns Sterling Hospitals. Year by year, Actis raised its stake to 80 per cent.
• 2011: JM Financial was appointed to sell Actis' stake, eyes total value of Rs 600 cr. Negotiated with Fortis, Apollo, Parkway Hospitals.
• 2012: Sale plan kept on hold
• 2013: Kotak Mahindra I Bank was given a sell mandate. Negotiated with Bangalore-based Healthcare Global
• 2013 Dec: controlling stake was sold back to promoters - Girish Patel & family

There will be no change in management of the hospital, headed by a chief executive officer, Rajiv Sharma.

Though Actis had given a sell mandate to JM Finance in 2011, it couldn’t find a buyer and the sell-off plan was kept on hold for the past year. By the middle of 2013, Actis had given a sell mandate to Kotak Investment Banking.

It was in July 2006 that Actis had acquired a 41 per cent stake in Sterling Addlife India Ltd, which owns Sterling Hospitals, for $15.5 million. Actis had later raised its stake to 80 per cent. The remaining stake is with Girish Patel.

When Actis had given the sale mandate in 2011, the PE major was looking for an enterprise value of Rs 550-600 crore. It had discussion with hospital chains such as Fortis and Apollo, beside global entities such as Parkway Hospitals. According to reports, HealthCare Global  had made a bid for a little over Rs 450 crore but then withdrew.

Actis was an investor in the Patel-founded Paras Pharma, the personal care products company. In 2010, Actis had sold its 63 per cent stake in Paras to Reckitt Benckiser for around Rs 2,100 crore. Patel had then made around Rs 1,000 crore by selling his 30 per cent stake.

Only recently, Bangalore-based Temasek and Premji Invest-backed HealthCare Global  and Olympus Capital-backed DM Healthcare were in the contest to buy Sterling. Earlier, there were reports of Khazanah-backed Parkway Holdings and India Value Fund Advisors being interested. However, the deals did not go through.

Sterling's turnover was estimated to be around Rs 250 crore in 2011 and is around Rs 275 crore at the moment. While the deal size is not known, it is estimated to be above Rs 400 crore.

Patel had at the time of the sale of Paras to Reckitt told Business Standard he did not want to go for a listing of the company to offer an exit to Actis with his 30 per cent stake. "If I would have had over 50 per cent stake in Paras,  I would have definitely gone for a listing," he had said.

Patel began his career early, at the age of 16, in a firm run by relatives. He had built Paras with brothers Darshan and Devendra. The latter later exited the company and on both occasions, Actis had bought the stakes.