Emami to invest Rs 2k cr in healthcare

Subsidiary to dilute 25% stake to PE firms; add seven hospitals, expand existing three over two years.

Emami, the Kolkata-based diversified group, would be investing about Rs 2,000 crore in the next two years on the healthcare segment.

Advance Medicare and Research Institute (Amri) Hospitals Ltd, controlled by Emami, is setting up seven hospitals across north and east India, with an investment of Rs 1,750 crore. Another Rs 300 crore would be spent on adding beds at existing hospitals.

The Indian private hospitals segment would reach a size of $54 billion by 2014, with a compounded annual growth rate of 20 per cent against the present level of $26 bn, says a recent study by The Associated Chambers of Commerce and Industry of India (Assocham).

The Rs 250-crore Amri Hospitals is looking at a revenue of Rs 500 crore in the next two years. Emami holds 66 per cent stake in Amri. The Kolkata-based Shrachi Group and the West Bengal government are among others holding the remaining stake.

A senior official at Emami said Amri would raise the needed money through a mix, 70:30, of debt and equity. It is likely to dilute about 20-25 per cent stake to private equity firms.

Aditya Agarwal, director, Emami, said, “We are considering a mix of debt and equity. Though we have not finalised the plans, PE players have shown interest in the company (Amri) and we are also considering those options.” He refused to disclose the figures.

In West Bengal, Amri is setting up four hospitals, with 1,300 beds. The projects are at Rajarhat (500 beds), Siliguri (300 beds), Burdwan (200 beds) and North Kolkata (300 beds). The overall cost would be Rs 800-1,000 crore. Currently, Amri has a capacity of 1,000 beds across three hospitals at Kolkata, in Dhakuria, Salt Lake and Mukundapur. The process of adding 600 more beds in these hospitals with an investment of Rs 300 crore has already started. Amri’s three other projects are at Raipur, Patna and Ranchi, with a capacity of 300 beds each, at an overall cost of Rs 750 crore.

TOP PE DEALS IN HOSPITALS SPACE
Year	Target	Buyer	Deal Value  ($mn)
2007	Apollo Hospitals	Apax Partners	104
2008	Narayana Hrudayalaya	JP Morgan, PineBridge	100
2007	Max Healthcare	International Finance Corp	74
2008	DM Healthcare	India Value Fund	50
2008	Wockhardt Hospitals	Brand Equity Treaty, Citi Group	38
2008	Sahyadri Hospitals	India Advantage Series II	36
Source: VCCedge

A study by KPMG says India will need another two million beds by the end of 2028, to achieve a target of five beds/1,000 patients. At present, India has one hospital bed per 1,000 people, as against the global average of three beds per 1,000 people.

Amri has also joined the contest to acquire Ahmedabad-based Sterling Hospitals, which is backed by Actis, the private equity major. The Rs 250-crore Sterling has 1,000 beds in four multi-speciality tertiary care hospitals, one each in Ahmedabad, Vadodara, Rajkot and Bhavnagar. It has secondary care hospitals in the Mundra special economic zone and at Adipur, both in Kutch.

Though there is increasing potential, not many PE activities are happening in healthcare. According to data from VCCedge, since 2006, there were 46 deals worth $864 million in the hospital sector in India. Till date in 2011, only four deals worth $45 mn have taken place, against eight deals worth $89 mn in 2010. Year 2008 witnessed the highest number of deals, 12 worth $313 mn in the same space.