Hospital chain Shalby mulls taking PE route

Private equity players seem to be finding hospitals as healthy investments and health-care providers have been cashing in on the interest. Joining the bandwagon recently was Ahmedabad-based Shalby Limited, which aims to offload 10-15 per cent stake to private equity players to fund its plans to add 1,000 beds. The expansion would cost the privately held company, headed by Vikram Shah, close to Rs 500 crore.

Shah did not wish to divulge the net worth of the chain. But industry insiders have estimated its valuation at Rs 800-1,000 crore. He said Shalby aimed to touch a turnover of Rs 70 crore in the current year, taking it up to Rs 250 crore in two years.

Private hospitals seem to be increasingly becoming an attractive bet for private equity players. The Government of Singapore Investment Corporation invested around Rs 500 crore in Vasan Healthcare that runs eye hospitals. Olympus Capital Asia Investments invested Rs 500 crore in DM Healthcare that runs hospitals in West Asia and India. Sequoia Capital invested around Rs 100 crore in Moolchand Healthcare. Delhi-based vaccine player Panacea Biotec is planning to tap private equity to invest in this business. In 2006, Actis PE picked up a 41 per cent stake in Addlife Medical Institute, which owns Sterling Hospitals, another Ahmedabad-based hospital, for $15.5 million. Actis now holds close to 80 per cent stake in Sterling; the rest is held by Girish Patel, the former promoter of Paras Pharma.

Hospitals are expected to be big business in the coming years, according to a recent study by the Associated Chambers of Commerce and Industry of India. By 2014, the private hospital market in India would grow from $26 billion to $54 billion, at a compounded annual growth rate of 20 per cent.

Shalby’s plans to tap PE funds would not come as a surprise in this backdrop.

Talking to Business Standard around a year ago, Shah had said Shalby Limited was a debt-free company. “However, we plan to take on some debt. We plan to infuse funds from PE investors in the coming years. We can offload 10-15 per cent.”

Shalby recently acquired city-based Krishna Heart Institute to augment its bed count. It acquired 86 per cent stake in Yogeshwar Healthcare Ltd, which runs Krishna Hospital in the outskirts of Ahmedabad, for an undisclosed sum. Industry sources pegged the deal at Rs 75-80 crore. “We are comfortably placed as far as our growth plans are concerned. But when opportunities, like Krishna Hospital buyout, come by, one has to take on some debt,” Shah said.

Shalby Hospitals now has 450 beds in Ahmedabad, the highest by any corporate hospital in the city. With the latest acquisition, the group’s bed count goes up to 700 in Gujarat and Goa.

Shalby plans to start close to four projects in Madhya Pradesh, two in Rajasthan and another in Surat in southern Gujarat. It has a piece of land in Indore, and is in talks for projects in Bhopal (200 beds), Jabalpur (200 beds), Ujjain (100 beds). In Rajasthan, the company is in talks with developers for projects in and around Jaipur (100- and 200-bed hospitals), and the Surat unit of 250 beds is in final stages as well.

Shalby will be looking to buy resort properties in Goa, where it plans to start a rejuvenation clinic for cardiac and post-trauma patients, Shah added.