DM Healthcare closing in on two key acquisitions for $100 million

Outlines Rs 1,200 crore expansion

DM Healthcare, the Dubai-based healthcare major, is understood to be closing on two key acquisition of hospitals in India with a spend of $100 million as part of its Rs 1,200 crore expansion in India over the next two years.  The healthcare major which raised $100 million through the private equity route from Olympus Capital during early last year is understood to be in advanced discussions with two hospitals in South India and a transaction with at least one of them is expected to be closed during the ongoing quarter.

According to investment bankers who are in the loop on DM Healthcare’s inorganic plans, the company is in advanced discussions with a hospital near Hyderabad for close to Rs 200 crore. A senior official of DM Healthcare told Business Standard that inorganic expansion in pretty much part of its plans in India and added they intend to add at least 2,000 beds through this route over the next two years.

DM Healthcare has close to 1,000 beds in India and is looking to take this up to 4,000 in two year’s time by establishing clusters of 'Hub and Spoke Hospitals' in the Tier II and III cities. Most of the hospitals will be acquired or established as brown field projects.
The Group is already active in Maharashtra with hospitals at Kholapur, ophthalmic Centres in NCR Delhi, IVF Centres in South India are some other niche areas being explored. Even as this expansion is being planned, its DM MedCity at Kochi, a green-field venture, with an investment of  $300 million when completed, will be attracting patients from the world over. Phase I of the Project with a 500 bed Quaternary Care Hospital, Medical Convention Centre, Hotel and Apartments will be built at a cost of  $150 million on a 40 acre land already acquired by the Group.

Olympus Capital post its $100 million investment in DM Healthcare holds 26%, while the earlier PE investor India Value Fund exited partly.

The healthcare sector in India has been the second most sought after industry for the private equity investors during last year with as much as $1.2 billion invested across 48 deals. Some of the major investments worth $100 million or more in the healthcare segment include Manipal Health Systems, Care Hospitals and Vasan Eyecare besides DM Healthcare.

According to investment bankers who are active in the healthcare segment, there are quite few hospitals in India which are attractive for consolidation. During last year, Actis Private Equity was looking to exit Gujarat-based Sterling Hospital, while ICICI Venture has a bouquet of hospitals, which it will probably be exiting during 2013.

“Given the context where the major hospital chains such as Manipal Healthcare, Care Hospitals and DM Healthcare are scouting for acquisitions, the valuations of region-based hospital chains have shot up substantially making it difficult for expansion of hospital chains,” an investment banker added.