Max Healthcare up 9% in one week post Lucknow-based Sahara Hospital buyout

On December 8, Max Healthcare said it entered into a share purchase agreement for acquisition of 550 bedded Sahara Hospital, Lucknow.

Shares of Max Healthcare Institute (MHIL) hit a new peak at Rs 717.65, as they gained nearly 3 per cent on the BSE in Wednesday’s intra-day trade in an otherwise subdued market. In comparison, the S&P BSE Sensex was down 0.08 per cent at 69,495 at 09:41 AM.

The stock of private healthcare provider was quoting higher for the fifth straight day. In past one week, the stock has rallied 9 per cent after the company entered into a share purchase agreement for acquisition of 550 bedded Sahara Hospital, Lucknow. In past one week, the benchmark index was up 0.14 per cent.

On December 8, MHIL announced the execution of binding Share Purchase Agreement (SPA) for acquisition of 100 per cent stake of Starlit Medical Centre Private Limited (Starlit) for an enterprise value of Rs 940 crore through one of its wholly-owned subsidiaries, Crosslay Remedies Limited (CRL).

Starlit had entered into a Business Transfer Agreement (BTA) with Sahara India Medical Institute for purchase of Healthcare Undertaking consisting of 550 bedded Sahara Hospital, Lucknow, on a slump sale basis, MHIL said in an exchange filing.

CRL, a wholly-owned subsidiary of MHIL, which owns and operates Max Super Speciality Hospital, Vaishali and Max Medical Centre, Noida. This acquisition marks Max Healthcare’s entry into Lucknow, one of the fastest growing cities of Uttar Pradesh, the company said.

Considering the performance of Medanta and Apollo Hospital (APHS) in Lucknow, the brokerage firm Motilal Oswal Financial Services (MOFSL) assumes MHIL to achieve EBITDA margin of 30 per cent over the next 12-18 months.

With this acquisition, MHIL has entered one of the promising cities from the healthcare perspective. Additionally, under-penetrated healthcare infrastructure in Central/Eastern UP and Bihar would aid the scale-up of hospital even faster, MOFSL said.

The brokerage firm raises its earnings estimate by 3 per cent for FY25 to factor in the addition of business from Sahara Hospital. “We expect a CAGR of 19 per cent/23 per cent in EBITDA/PAT over FY23-25 for MAX on the back of an 8 per cent CAGR in ARPOB, bed addition as well as improved occupancy at existing hospitals,” MOFSL said.