Advent set to buy CARE Hospitals

After Sterling Hospitals, DM, Vasan Healthcare and Medford Hospitals, the hospital sector comes again in the radar of marquee private equity firms.

In a latest development, the US-based private equity major, Advent International is closing in to acquire a majority stake in Hyderabad-based hospital chain, CARE Hospitals. The size of the transaction is not yet known, but a source indicated that it could be around Rs 400 crore-500 crore.

According to people close to the development, Rakesh Jhunjhunwala, Nimmagadda Prasad, founder of Matrix Labs and UK-based Ashmore together hold about 80 per cent in the hospital and the remaining with the management. They added the deal was in the last stages of negotiations and the final diligence was still on. A formal announcement was due within a fortnight.

CARE, the leading hospital chain in the South comprises 1,600 beds across 12 hospitals. The Hyderabad-based entity also has presence in Bhubhaneswar, Nagpur, Secundarabad Surat and Vizag.

It is estimated to reach $54 billion by 2014 by growing at a compounded annual growth rate of 20 per cent as against the present level of $26 billion, according to a recent study by the Associated Chambers of Commerce and Industry of India. A study by Ernst & Young says India will need another 1.75 million beds by the end of 2025. At present, the country has one hospital bed per 1,000 people, as against the global average of four beds per 1,000 people.

Advent International’s funds made their first Indian investment in October 2007 in Computer Age Management Services Ltd.

When contacted, Shweta Jalan, Director, Advent India said they don’t want to comment on speculations. Jhunjhunwala also didn't not respond to queries by Business Standard. Advent has a strong presence in healthcare and invested in 25 companies globally. According to sources, Vikram J S Chhatwal, who set up and headed the healthcare business for Reliance ADAG and even manned the Anil Ambani’s flagship venture Kokilaben Hospital in suburban Mumbai, is the key man behind the deal.

After a stint there, Chhatwal moved to Anil Ambani-controlled Medi Assist India TPA Pvt Ltd, which provides third-party administrator services for health insurance-related claims.

Medi Assist was subsequently bought out by Bessemer Venture Partners with Chhatwal owning a minority stake in the company.

According to sources, Chhatwal who now advises Advent on healthcare investments in India was the main catalyst in CARE Hospital buyout.