Actis tries again to sell Sterling Hospitals

Subsequent to pause after 2011 attempt to exit didn't come off, mandate given this time to Kotak Mahindra

Actis, the UK-based private equity (PE) major is trying for a second time to sell its 80 per cent stake in Ahmedabad-based Sterling Hospitals.  

Sources say early this month, it appointed Kotak Investment Banking, subsidiary of Kotak Mahindra Bank, to find a buyer for the chain. Though Actis had given a sell mandate to JM Finance in 2011, it couldn’t find a buyer and the selloff plan was kept on hold for the past year. 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. They’d later bought more stake.

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 strategic investors and hospital chains such as Fortis and Apollo, beside global entities such as Parkway Hospitals and PE firms interested in the Indian healthcare sector, such as IVFA.  

Mails sent to J M Trivedi, Actis’ head for South Asia elicited no response. When contacted, Rajiv Sharma, chief executive, Sterling Addlife India, said, “As a policy, we don’t comment on any matter related to shareholders.”

Sterling has seven multi-speciality hospitals. Those at Ahmedabad, Vadodara, Rajkot and Bhavnagar are tertiary care multi-speciality ones. Two others, at the Mundra Special Economic Zone and at Adipur (both in Kutch) are secondary care hospitals, with plans to upgrade to tertiary care hospitals. Sterling also operates a cardiac centre at Mehsana. Experts say factors such as its investment in Sterling reaching a seventh year and better prospects for deals in the hospital sector have prompted Actis to try its luck for a second time. Normally, PE firms hold their investments for a seven or eight year horizon. Lack of presence in other north Indian states was also considered a drawback for the hospital chain in getting sold.

The number of PE transactions in the hospital sector is picking up fast in 2013. The year has already seen 13 PE deals, worth $291 mn, in the sector against 13 worth $403 mn in 2012.

Since 2011, 37 PE or venture capital deals worth $808 mn have been taken place in hospitals, show data from VCCEdge.

A CARE Research report in 2012 said the healthcare sector had the potential to almost double to Rs  5 trillion over the next five years, implying a compounded annual growth rate of 12 per cent. This will be mainly driven by a rise in per capita spending on healthcare, change in demographic profile, transition in disease profile, increase in health insurance penetratio and the fast growing medical tourism market.

According to CARE, the hospital segment accounts for roughly 70 per cent of the total healthcare market. India will need another 1.75 mn beds by the end of 2025. Currently, the country has one hospital bed per 1,000 people, against the global average of four.