Sequoia eyes Rs 100-crore deal with Cloudnine Hospitals

Cloudnine to use funds to expand into cities outside Karnataka

After its Rs 100-crore deal with Moolchandani Healthcare last year, venture capital firm Sequoia Capital is eyeing another large transaction in the healthcare space. It is holding talks with the management of Bangalore-based Cloudnine Hospitals to invest about Rs 100 crore for a 15-20 per cent stake in the hospital chain, according to sources in the know.

Cloudnine, which has seven hospital facilities, is a venture of the Kids Clinic Bangalore and Scrips N Scrolls India, which is engaged in property development and investments. Its valuation is at around $100 million(Rs 600 crore).

Chennai-based Spark Capital is advising Cloudnine for the fundraising process. Sources said the diligence process had started and the deal could be finalised in a month. Cloudnine, which focuses on infant and maternity care, has recently forayed into paediatric care, launching a hospital dedicated to this segment in Bangalore. A Sequoia spokesperson said the company does not comment on market speculation. The Cloudnine Hospitals management refused to comment.

Sources said with the proposed funding, the hospital chain planned to expand into major cities outside Karnataka. It plans to open two hospitals outside Karnataka this year and three more next year. These would include infant and maternity care, as well as paediatric care hospitals.

In 2011, Matrix Partners had invested about Rs 45 crore in Kids Clinic Bangalore.

Sequoia Capital, which manages investments worth about $1.4 billion in India, has a strong portfolio of healthcare investments. This portfolio includes Vasan Healthcare, New Delhi-based Moolchand Healthcare, Rajasthan-based ASG Eye Hospitals, bio-pharmaceutical company Celon Labs, rural healthcare start-up Glocal Healthcare Systems, Suburban Diagnostics, Sai Life Sciences and GVK Biosciences.

Earlier, it was reported Sequoia was likely to acquire stake in Vini Cosmetics for Rs 100 crore. As the healthcare space remains somewhat insulated from regulatory hurdles, a handful of hospitals and healthcare clinics are trying their luck in fundraising.

While Ahmedabad-based Shalby Limited plans to offload 10-15 per cent stake to fund its Rs 500-crore expansion plans, private equity major Actis is set to sell its stake in Sterling Hospitals.

According to a CARE Research report, India would need an additional 1.75 million hospital beds by the end of 2025. Currently, there is one hospital bed/1,000 people, against the global average of four.